GDP down 11.8% and employment down 2.9% in euro area
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Topics: EURO
These were by far the sharpest declines observed since the time series started in 1995. In the first quarter of 2020, GDP had decreased by 3.7% in the euro area and by 3.3% in the EU.
Compared with the same quarter of the previous year, seasonally adjusted GDP decreased by 14.7% in the euro area and by 13.9% in the EU in the second quarter of 2020, after -3.2% and -2.7% respectively in the previous quarter.
These were also by far the sharpest declines since the time series started in 1995.
GDP growth by Member State
Among Member States for which data are available for the second quarter of 2020, Spain (-18.5%) recorded the sharpest decline of GDP compared to the previous quarter, followed by Croatia (-14.9%), Hungary (-14.5%), Greece (-14.0%), Portugal (-13.9%) and France (-13.8%).
The lowest declines of GDP were observed in Finland (-4.5%), Lithuania (-5.5%) and Estonia (-5.6%), followed by Ireland (-6.1%), Latvia (-6.5%) and Denmark (-6.9%).
GDP components and contributions to growth
During the second quarter of 2020, household final consumption expenditure decreased by 12.4% in the euro area and by 12.0% in the EU (after -4.5% in the euro area and -4.2% in the EU in the previous quarter). Gross fixed capital formation decreased by 17.0% in the euro area and by 15.4% in the EU (after -5.2% and -4.6% respectively).
Exports decreased by 18.8% in both the euro area and the EU (after -3.9% and -3.2% respectively). Imports decreased by 18.0% in the euro area and by 17.8% in the EU (after -3.2% and -2.8% respectively).
Household final consumption expenditure had a very strong negative contribution to GDP growth in both the euro area and the EU (-6.6 and -6.3 percentage points – pp, respectively) and the contribution from gross fixed capital formation was also strongly negative in both zones (-3.8 and -3.4 pp respectively).
The contributions from the external balance and government final expenditure were also negative in both zones, while the contribution of changes in inventories was slightly positive in the euro area and slightly negative in the EU.
GDP levels in the euro area and EU
The COVID-19 pandemic also had a strong impact on GDP levels. Based on seasonally adjusted figures, GDP volumes were significantly lower than the highest levels of the fourth quarter of 2019 (-15.1% in the euro area and -14.3% in the EU).
This corresponds to the lowest levels since the the first quarter of 2005 for the euro area and the third quarter of 2009 for the EU. For the United States, GDP was 10.2% below the level of the fourth quarter of 2019, which is the lowest level since the fourth quarter of 2014.
Employment growth in the euro area and EU
The number of employed persons decreased by 2.9% in the euro area and by 2.7% in the EU in the second quarter of 2020, compared with the previous quarter. These were the sharpest declines observed since the time series started in 1995. In the first quarter of 2020, employment had decreased by 0.3% in the euro area and by 0.2% in the EU.
Compared with the same quarter of the previous year, employment decreased by 3.1% in the euro area and by 2.9% in the EU in the second quarter of 2020, after +0.4% in both zones in the first quarter of 2020. These were also the sharpest declines observed since the time series started in 1995.
While the impact of the COVID-19 pandemic on employment in persons was still relatively moderate due to government support schemes, declines in hours worked were much more pronounced. Hours worked decreased by 12.8% in the euro area and by 10.7% in the EU in the second quarter of 2020, compared with the previous quarter.
Compared with the same quarter of the previous year the declines were 16.6% in the euro area and 13.8% in the EU respectively (see annex table on employment in hours worked). Both were by far the sharpest declines since the beginning of the time series. These data provide a picture of labour input consistent with the output and income measure of national accounts.
Employment growth in Member States
In the second quarter of 2020, employment in persons decreased in all Member States compared with the previous quarter, except in Malta (+0.6%).
The largest decreases were recorded in Spain (-7.5%), Ireland (-6.1%), Hungary (-5.3%) and Estonia (-5.1%). The decrease in hours worked was generally much more pronounced for all Member States.
Employment levels in the euro area and EU
Based on seasonally adjusted figures, Eurostat estimates that in the second quarter of 2020, 203.1 million people were employed in the EU, of which 155.6 million were in the euro area. In relation to the coronavirus pandemic, employment in persons decreased by 5.1 million in the euro area (-3.2%) and by 6.1 million (-2.9%) in the EU compared with the highest levels of the fourth quarter of 2019.
These are the lowest levels since the first quarter of 2017 for both areas. Compared to the fourth quarter of 2019, the number of hours worked was 16.4% lower in the euro area and 13.5% lower in the EU. These are the lowest levels since the beginning of the time series in 1995.
Evolution of labour productivity in the euro area and EU
The combination of GDP and employment data allows an estimation of labour productivity. The analysis of growth compared to the same quarter of the previous years shows that productivity growth (based on employed persons) fluctuated around 1% for both zones between 2013 and 2018.
In relation to the coronavirus pandemic, there was a sharp decline in productivity based on persons in the first and second quarter of 2020 as GDP dropped sharply while the impact on employment in persons was still relatively moderate.
Based on hours worked the impact on productivity was limited. In the euro area there was a slight increase since hours worked dropped more sharply than GDP, contrary to the EU, where productivity declined slightly.
The euro area (EA19) includes Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland.
The European Union (EU27) includes Belgium, Bulgaria, Czechia, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland and Sweden. ■