France, Italy and Spain reported sharp contractions on Friday as their economies were hit hard by the corona virus, with the pandemic wiping out years of growth in a matter of weeks when the lockout closed shops, factories and restaurants.
Spain’s economy shrank by 18.5% in the April-June period from the previous quarter, the French economy by nearly 14% and Italy by 12.4%.
Spain’s contraction is by far the sharpest drop since the country’s national statistics body began gathering data. Spanish Prime Minister Pedro Sánchez met late Friday with regional leaders in Spain to discuss how to rebuild the economy and where to spread billions of euros in EU aid for recovery.
Spain in mid-March experienced closure for more than three months, stopping many economic activities, due to COVID-19 cases and soaring deaths. Lockdown ends June 21.
In France, a surprising decline of 13.8% in April-June from the previous three-month period also clearly illustrates the economic costs of the penalty of a two-month lockout. It was the third consecutive economic contraction in a worsening French recession. The pain has been so damaging to jobs and industry that the government is talking about the possibility of another national lockdown because the infection is increasing again.
The French economy had shrunk in the last quarter of 2019, before the coronavirus pandemic attacked at full strength. For France and other major economies, this caused a sharp decline.
“All the growth in GDP seen in the decade 2010-2019 has been removed in five months,” said Marc Ostwald, chief economist at ADM Investor Services International. In the case of Italy, economists say they are wiping out around 30 years of growth.
Because lockdowns have abated and many businesses have reopened, there is hope that the recession will be short-lived, although an increase in transmission in many countries remains a risk.
France fared worse than Germany, Europe’s largest economy, which on Thursday reported a 10.1% decline in GDP during the April-June period as exports and business investment collapsed. Germany’s decline is also the biggest since quarterly growth figures began to be compiled in 1970, the official statistics agency said.
In March, the health crisis prompted the French government to introduce what is one of the tighterest European stalls, stopping many activities in the second largest economy in countries that use the euro currency. In France, COVID-19 has now killed more than 30,000 people and infected more than 186,000.
In releasing gloomy numbers on Friday, Insee said the economic low was in April, when only workers who were considered important could leave their homes. Activities began to increase again from May when the authorities began to ease lockdown restrictions, Insee added.
Friday’s figures show that the construction industry is one of the hardest hit in France, because workplaces stand idle, with workers forced to stay at home.
Detained families, many of whom have survived by government grants and work preservation schemes, have tightened their wallets amid job worries but also because shops have closed. Household spending dropped 11% in April-June, following a 5.8% decline in the first quarter.
Trade was also hit, when global lockdown stopped flights, closed borders and factories, and made transportation chaotic. French imports, already down 5.5% in the first quarter, shrank further in the second quarter, down 17.3%.
The damage to exports was even worse, down by a whopping 25.5% in the second quarter after a 6.1% retreat in the first quarter.