The euro area economy contracted at the fastest pace on record in the second quarter to enter a historic recession as all major economies in the bloc logged double-digit declines due to the restrictions imposed to curb the spread of the coronavirus.
Gross domestic product fell 12.1 percent on a quarterly basis, bigger than the 3.6 percent drop in the first quarter, preliminary flash estimate published by Eurostat showed Friday.
This was bigger than the economists’ forecast of 11.2 percent and was the sharpest decline seen since the series began in 1995. The revised estimate for the second quarter is due on August 14. Year-on-year, GDP was down 15 percent versus a 3.1 percent decline a quarter ago. Economic output was expected to fall 13.9 percent.
All big-four member countries contracted sharply, with Spain posting the biggest fall of 18.5 percent on quarter, much larger than the 5.2 percent decrease logged in the first quarter.
France’s economy shrank by a record 13.8 percent sequentially, following the first quarter’s 5.9 percent decrease. Likewise, the decline in Italy’s GDP deepened to 12.4 percent from 5.4 percent in the first quarter.
Germany’s GDP fell 10.1 percent sequentially after shrinking 2 percent in the first quarter.
Parts of the economy have sprung back to life since April, but the damage already done plus the current and future impact of the virus mean the recovery will be painfully slow and uneven, Andrew Kenningham, an economist at Capital Economics, said.
While GDP has already started to climb thanks to reopenings, a V-shaped recovery is wishful thinking, Bert Colijn, an ING economist said.
According to the European Commission forecast, the currency bloc will shrink 8.7 percent in 2020 before expanding 6.1 percent in 2021.
Another report from Eurostat showed that inflation in the currency bloc rose unexpectedly to 0.4 percent in July from 0.3 percent in June. Economists had forecast the rate to ease to 0.2 percent.
Headline inflation continued to remain well below the European Central Bank’s target of “below, but close to 2 percent.”
On a monthly basis, the harmonized index of consumer prices was down 0.3 percent.
Core inflation that excludes energy, food, alcohol and beverages, accelerated to 1.2 percent from 0.8 percent in June.