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Rebound in French and Spanish economies overshadowed by virus

France and Spain outstripped expectations for economic growth in the third quarter with a rebound from their coronavirus-induced recession earlier in the year, but output remained well below pre-pandemic levels.

The French economy grew 18.2 per cent quarter on quarter, leaving output 4.1 per cent below its level at the end of last year, figures published on Friday showed. Spain’s economy remained 9.1 per cent below its level at the end of December, despite growing at 16.7 per cent in the third quarter — the fastest pace on record.

Figures for Germany, also due out on Friday, are expected to show its economic rebound has left its output 5.3 per cent below pre-pandemic levels.

The resurgence highlights how businesses and consumers ramped up output and spending once the first round of coronavirus lockdowns was lifted in May.

But the recovery is already being undermined by the recent partial reimposition of restrictions in many European countries after daily coronavirus infections rose to new highs, which has put a damper on activity and confidence since September.

Separate data also published on Friday showed that French consumer spending on goods fell unexpectedly in September, dropping 5.1 per cent from the previous month — taking it back below pre-pandemic levels for the first time since May. French consumer prices remained unchanged for the second consecutive month in October on an annual basis.

“Even before President [Emmanuel] Macron’s announcement of a new nationwide lockdown on Wednesday, which took effect at midnight last night, new coronavirus restrictions were undermining the recovery,” said Andrew Kenningham, an economist at Capital Economics.

Economists at Berenberg predicted that the new restrictions would cause another serious contraction in the French economy in the final three months of this year. “French GDP now looks set to decline significantly in the fourth quarter, possibly by 3 to 4 per cent,” they said.

Separate figures published on Friday painted a similar picture for German retail sales, which fell by much more than expected in September, fuelling fears that the country’s consumer sector was losing steam even before the new semi-lockdown.

The volume of retail sales in Germany fell 2.2 per cent in September compared with the previous month, down from a 3.1 per cent expansion in August, official data showed.

French household spending rebounded 17.3 per cent in the third quarter, leaving it 2.1 per cent below last year’s level, while public sector consumption regained all its lost ground and ended the quarter 0.4 per cent above last year’s level.

In Spain, demand recovered more strongly, down 6.8 per cent on last year’s level, while investment was 12.8 per cent below its level in the third quarter of 2019.

Spain’s sharper fall in output partially reflects the lack of international tourists in a country that relies on foreign visitors’ revenues more than its peer economies.

Spain also registered soaring infections and tightening restrictions earlier than most other European countries, which damped demand in September and chocked activity from the onset of the final quarter.

On Thursday, the US commerce department reported that the US economy grew at a quarterly rate of 7.4 per cent in the three months to September, rebounding to within 3.5 per cent of its level at the end of last year.


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