Eurozone economy soars record 12.7% but fears grow for winter

The European economy grew by an unexpectedly large 12.7% in the third quarter as companies reopened after severe coronavirus lockdowns, but the rebound is being overshadowed by worries that growing numbers of infections will cause a new downturn in the final months of the year.

The upturn in the July-September quarter and the worries about what's ahead echoed the situation in the United States, where re-openings led to strong third-quarter recovery but didn't dispel fears for the winter months.

The European rebound, reflected in figures released Friday by EU statistics agency Eurostat, was the largest increase since statistics started being kept in 1995. It followed an 11.8 per cent contraction in the second quarter in the 19 European Union member countries that use the euro currency. The April-June period was when restrictions on activities and gatherings were most severe during the first wave of the pandemic. Many economists had expected a rebound of around 10 per cent.

The rebound was led by France, with an enormous 18.2 per cent increase, followed by Spain with 16.7 per cent and Italy with 16.1 per cent.

Rosie Colthorpe, European economist at Oxford Economics, said that while these strong growth figures are good news, the recent reintroduction of strict containment measures across the bloc is likely to push the recovery into reverse.

European Central Bank head Christine Lagarde said Thursday she expected November to be very negative, adding that most likely our fourth quarter number will be to the downside. Will it be negative? We don't know at this point in time. Manufacturing companies have seen a stronger bounce back than services. Automakers like Volkswagen and Daimler AG's Mercedes-Benz have seen sales and profits rebound, helped by their exposure to China, where the virus hit earlier but has since mostly been contained.

Meanwhile, businesses that rely on face-to-face interaction, such as restaurants, hotels and airlines have been devastated and are seeing only a small fraction of their previous business. Rising infections led the German government to order theaters, bars and restaurants to close from Monday through Nov 30.

France, starting Friday, re-imposed a nationwide lockdown for the next month, closing all non-essential business and forbidding all movement beyond 1 kilometer, or just over half a mile, from home except to go to school or for a few other essential reasons.

The government is promising another 15 billion euros in aid to businesses hit by the lockdown, on top of hundreds of billions of euros already spent this year on temporary unemployment and other measures.