Eurostat 1st Q2 estimate sees euro area's GDP down by 12.1 pct

French Economy Suffers Record Slump

U.S. GDP plunges by 33% in the second quarter, the worst drop in history

Brussels-The European economy was hit by its sharpest recorded contraction in the second quarter, with GDP down 12.1 percent in the eurozone and 11.9 percent across the EU. It was the largest drop on record.

Spain, however, recorded an 18.5 percent plunge in second-quarter GDP, reflecting one of the most stringent COVID-19 lockdowns in Europe which battered its key tourism industry.

GDP in Italy and France also fell sharply but less than forecast, respectively by 12.4% and 13.8%. Meanwhile, the lowest decline was recorded in Lithuania (-5.1%).

The decline in Europe compares with a 9.5% quarter-on-quarter drop in the United States, which unlike Europe has not yet been able to get its contagion numbers firmly down yet and whose economic recovery is in doubt.

European governments are countering the downturn with massive stimulus measures at the national and European Union level.

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

Inflation continued instead its upward trend, defying expectations of a slowdown, supporting the European Central Bank's expectation that a negative headline reading may be avoided.

Gains in the techs helped provide some support but not enough to make a huge difference at the end of yet another turbulent week. The rate rose to 7.8% in June from 7.7% in May.

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.

The plunge in quarter-on-quarter gross domestic product (GDP) took Italy - the eurozone's third-largest economy - into recession as it had shrunk by 5.4 per cent in the first quarter.

Finance Minister Bruno Le Maire pounced on the data to encourage consumers to spend money saved during the lockdown to pull the country out of the deepest recession since World War Two.

"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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