Italy's GDP plunges 12.4pct on virus impact

Cornelia Mascio
Agosto 1, 2020

The euro zone's economy recorded its deepest contraction on record in the second quarter, preliminary estimates showed on Friday, while the bloc's inflation unexpectedly ticked up in July.

Spain, which suffered a severe virus outbreak that devastated its tourism industry, was the hardest hit with a 18.5% drop.

National governments have stepped in with loans to keep businesses afloat and wage support programmes that pay workers salaries while they are furloughed.

And continued to defy expectations of a slowdown. Excluding volatile food and energy prices, a key measure watched by the European Central Bank, inflation rose by 1.3% from 1.1% in June, Eurostat's flash estimates showed.

Locked-down families, many surviving on government handouts and job-preservation schemes, tightened their purse strings amid fears for jobs but also because shops were closed.

Spain in mid-March went into a more than three-month lockdown, bringing much economic activity to a halt, as COVID-19 cases and deaths surged.

There was a huge drop in GDP also in Germany, Europe's biggest economy.

In another hopeful sign, consumer spending - the traditional engine of the French economy - shot back above its pre-lockdown level in June, INSEE said.

Rosie Colthorpe, European economist at Oxford Economics, said the current third quarter was likely to see high growth rates, "but not almost large enough to make up for the damage".

The Spanish economic drop was by far the sharpest since the country's national statistics agency began collecting data.

It said the drop was "part of an global context in which the main economies are recording reductions of a similar magnitude due to the spread of the pandemic".

"We are not powerless in the face of the crisis", Finance Minister Bruno Le Maire said after the figures were released.

France is faring worse than Germany, Europe's largest economy, which reported a 10.1% plunge in GDP during the April-June period as its exports and business investment collapsed.

"All the growth in GDP seen in the 2010-2019 decade has been wiped out in five months", said Marc Ostwald, chief economist at ADM Investor Services International.

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