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 Union leaders have agreed on a 750 billion-euro recovery fund backed by common borrowing to support the economy from 2021. He said France is not "powerless in the face of the crisis", reminding that the government had taken "extraordinary measures" to shield businesses from the crisis.
[Screenshot via BEA.gov] The GDP was propped up, however, by federal spending, including forgivable loans that helped small businesses retain workers, and a $600-weekly boost to state unemployment benefits. The rate rose to 7.8% in June from 7.7% in May.
That has led to mammoth job losses. Major companies such as Lufthansa, Daimler and Airbus have said they will cut thousands of jobs. And it confirms comments earlier this week from Federal Reserve Chairman Jerome Powell, who called the current economic crisis "the most severe in our lifetimes".
But the outlook is for a long and uncertain climb back to pre-virus levels that could take until 2022 or longer.
Spain, which relies heavily on tourism, expressed its frustration at the United Kingdom this week, after the British government introduced a 14-day quarantine on people returning from the popular summer vacation destination.
Rosie Colthorpe, European economist at Oxford Economics, warned "recent flare-ups of the virus in several European countries risk derailing this recovery". It's the worst GDP report in history-far surpassing last quarter's 5% dip, and more than triple the previous worst-ever drop of 10% in 1958.
"This led to rapid shifts in activity, as businesses and schools continued remote work and consumers and businesses canceled, restricted, or redirected their spending", it declared, adding, "The full economic effects of the COVID-19 pandemic can not be quantified in the GDP estimate for the second quarter of 2020 because the impacts are generally embedded in source data and can not be separately identified".
The startling plunge of 13.8% from April-June starkly illustrated the punishing economic cost of the two-month lockdown. The pain has been so damaging to jobs and industries that the government is talking down the possibility of another nationwide lockdown as infections tick upward again.
Private spending was the factor that most dragged the economy down, along with investment and falling exports.
The Commerce Department said in a note that the economic crash was driven by lockdowns sparked by the outbreak of COVID-19, adding that the dismal number likely does not reflect the full impact of the pandemic response. In Italy's case, economists said it wiped out about 30 years of growth.