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Eurozone Economy Soars but Covid-19 Resurgence Leaves It the Global Weak Spot

The Eurozone economy took strides toward recovery in the latest quarter, but surging virus cases leaves it all in jeopardy.
(AePatt Journey)
(AePatt Journey)
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“The eurozone economy grew at a record pace in the third quarter, but has already stalled in the face of a resurgence of coronavirus infections and tough new restrictions, leaving Europe lagging even further behind the U.S. and Asia in its recovery from the crisis,” WSJ writes.

Remind me what the Eurozone is: It’s an economic region formed by 19 member nations, unified monetarily under the euro.

Growth Numbers:

  • Q3 2020 GDP: +12.7%
  • Q2 2020 GDP: -11.8%

Third-quarter growth in the Eurozone outpaced the U.S. However, that primarily reflects Europe’s longer and more-stringent second-quarter lockdown and a more substantial rebound effect when restrictions ended.

Here’s the problem: Infections in Europe are rising quickly. Policymakers throughout the continent have “steadily reined in social and economic activities.”

  • With Germany and France, two of Europe’s biggest economics, imposing new virus-quelling restrictions, the Eurozone is expected to shrink in Q4.

The Takeaway: China’s economy has returned to pre-pandemic output levels, while the U.S. is 3.5% below its previous mark. Eurozone trails slightly at 3.7%, but the severity of restrictions could keep Europe as the weak link.

  • Barclays Research estimates Europe’s large economies won’t recover until 2023.

Justin Oh:

From Morning Cents Oct. 23:

“The rising number of cases in the U.S. and Europe is definitely something for us to keep an eye on. It looks like countries in Europe are more-inclined to resuming restrictions than the U.S. is currently. I still believe the biggest driver of global stocks over the next three months will be the U.S. presidential and senatorial elections’ results and the policies implied after that.”

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