EU Data: Two weeks of Lockdown and -3.8% of GDP Decline in 1Q

Trading Tips


Recession in 2020 will go down in history as a deliberate economic sacrifice of governments in exchange of greatly reduced uncertainty. Incoming data shows that this step came at a great cost. Eurozone GDP fell by 3.8% YoY in the first quarter and it is only with lockdowns affecting economy just the last two weeks of March! The fallout is expected to spill over into the second quarter as the economy has been under extreme pressure for the whole month of April while weakening of sanitary restrictions will occur slowly and with extreme caution. We cannot also rule out long-term damage to consumer confidence which is yet to reveal itself in the data. The economic downturn is likely to exceed the magnitude of the first quarter, so the season of gut-wrenching data has probably just started.

French output fell by 5.8%, Spain – by 5.2%, Belgium – by 3.9%, Austrian – by 2.5%. There is a direct relationship between strictness of quarantine and impact on GDP as the latter reflects the degree of suppression of economic activity as well as restrictions on mobility of consumers. It means that German economy probably suffered less damage than France or Spain because the lockdown was less strict.


Unemployment in the Eurozone rose from 7.3% in February to 7.4% in March.

The increase in unemployment turned out to be less strong than anticipated both due to the labor market rigidities ( which in turn are caused by higher costs of hiring and lay-offs, prevalence of short-term working schemes), and due to smoothing of the effects of two-week quarantine in March by two “normal” weeks at the start of the month. Due to the above-mentioned features of the labor market in the Eurozone, it is precisely the dynamics of unemployment that will explain the speed of recovery and affect market expectations for economic rebound. With rising unemployment in the Eurozone, the likelihood of a permanent blow increases.

Consumer Inflation

April inflation in the Eurozone fell to 0.4%. As in the case of GDP, the accuracy of the figures is still in question due to difficulties in collecting data. Core inflation, which excludes fuel prices, fell from 1% to 0.9%, while measuring it for sure was much more difficult than usual. PMI surveys for the block showed that firms reduced prices to increase sales, but so far this is not visible in the data.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 70% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Share this post:

Let’s block ads! (Why?)


Leave a Reply

Your email address will not be published. Required fields are marked *