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The gross domestic product of euro area countries fell 3.8 percent in the first quarter of 2020, more than ever since the start of the measurement in 1995. France’s economic output declines more significantly than that of Italy and Spain.
France pays a high price for particularly strict restrictions on public life.
Until now, the coronavirus crisis has been measured mainly using parameters such as those that tested positive, the occupation of beds in intensive care units and deaths. With a little delay, the effects of the pandemic are now reflected in economic indicators as well.
According to a preliminary preliminary estimate by the EU statistical authority Eurostat, seasonally adjusted gross domestic product (GDP) in the 19 countries fell 3.8% in the first quarter of 2020 compared to the fourth quarter of 2019. 27 EU member states registered a decrease of 3.5% overall. This is the largest decrease since the start of measurement in 1995. Even in the 2008/09 financial crisis there was no comparable contraction.
The EU’s largest economy, Germany, has yet to release first-quarter data. They are announced for May 15. But as early as April, five major German economic research institutes made bleak estimates in their joint diagnosis. German GDP is expected to decrease by 1.9% compared to the last quarter of 2019. From April to June, the decrease is expected to increase further and to -9.8%, according to the institutes’ estimate. Figures show that some 10 million people in Germany have already signed up to work in the short term. This is an extremely high figure for around 45 million people in employment.
If the institute’s forecast for Germany is true, the country would do comparatively well in the first quarter. The three largest economies in the EU (France, Italy and Spain) registered above-average losses from January to March compared to the rest of the euro area.
Number two in continental Europe, France, on the other hand, posted a 5.8% drop, as the statistical office Insee announced on Thursday. It is the steepest decline in a quarter since these figures were first reported in 1949. Negative growth of 4% was expected. In particular, consumer spending declined sharply. This reflects the high price that the strict restrictions on public life in France have for the economy.
In Italy, which was hit particularly early and particularly hard by the pandemic, the Istat statistics office, on the other hand, surprisingly shows less negative growth of 4.7% compared to France. Market watchers expected -5%. The Spanish economy suffered a greater decline than that of Italy, but less severe than that of France, with 5.2%, according to the INE Institute. Experts had predicted “only” –4.4%.
Unemployment increased only slightly in March
Also on Thursday, Eurostat released data on unemployment in the EU in March 2020. It rose again for the first time since 2013, from 7.3% in the euro area in February to 7.4% in March. In the EU, the value increased from 6.5 to 6.6%. At first glance, this is a clear contrast, on the one hand, with the fall in GDP and, on the other hand, with information from countries such as the United States.
Firstly, this is due to Eurostat’s statistical definition of unemployment. The estimate for March is based on the definition of the International Labor Organization (ILO). Based on this, a person is unemployed if they have actively looked for work in the last four weeks and could find a job in the next two weeks. However, due to the limitations of public life, many people have actively stopped looking or been unable to start working because they have to take care of children, for example.
Furthermore, according to the EU Commission, all EU countries will soon have some sort of short-term job. However, the definition of unemployment means that short-term employees are not registered. This also leads to a decrease in the corresponding increase in value.
Falling energy prices lead to low inflation
The global economy, which was suspended in part due to the coronavirus pandemic, has caused a sharp drop in prices in the oil markets. This is also reflected in inflation in the euro area. According to Eurostat, this fell from 0.7% in March to 0.4% in April. If the most volatile prices for energy, unprocessed food, alcohol and tobacco are excluded, there is still a decrease from 1% in March to 0.9% in April. This is far from almost the 2% that the European Central Bank really aims with its expansive monetary policy.
