The eurozone's economy grew at the fastest rate since records began in the third quarter of this year as employment also rebounded from a record contraction caused by the Covid-19 pandemic.
Consumer spending and rising exports contributed to the resurgence, according to the EU statistics agency Eurostat, as gross domestic product (GDP) in the 19-country bloc increased by 12.5 per cent in the July-September period from the second quarter, the largest rise since the agency began collecting data in 1995.
Employment also increased by 1 per cent in the third quarter following a 3 per cent decline in the previous three months, also the strongest rise since records began.
“These were by far the sharpest increases observed since time series started in 1995, and a rebound compared with the second quarter of 2020, when GDP had decreased by 11.7 per cent in the euro area,” Eurostat said on Tuesday.
Business activity in the eurozone contracted in November as governments tightened lockdown measures to curb a second wave of Covid-19. IHS Markit's composite Purchasing Managers Index for the region, considered a good gauge of economic health, fell to 45.3 in November from October's 50.0.
In the second quarter of this year, eurozone GDP was 15 per cent below its pre-pandemic level, however, third-quarter growth leaves GDP down by “only” 4.4 per cent.
Jack Allen-Reynolds, senior Europe economist at Capital Economics, said the third-quarter data confirms that the economy staged a rapid rebound from the first lockdowns.
“This provides grounds for optimism about growth prospects for next year,” he said.
Meanwhile, the third-quarter increase in the number of people in work followed a decline of 3 per cent in the second quarter.
Ireland recorded the highest growth compared to the second quarter with a rise in employment of 3.3 per cent, followed by Spain with 3.1 per cent and Austria with 3.0 per cent. The largest decrease was found in Lithuania with a decline of 1.9 per cent.
While the data indicated a robust job market, the number of hours worked suggested government support measures were keeping employment artificially high.
“While the impact of the Covid-19 pandemic on employment in persons was mitigated by government support schemes, the changes in hours worked were much more pronounced,” the agency said.
“Hours worked increased by 14.8 per cent in the euro area in the third quarter of 2020, compared with the previous quarter.”
Household consumption rose by 14 per cent quarter-on-quarter and retail spending increased particularly sharply as non-essential shops reopened, said Eurostat.
This suggests many consumers are keen to return to their previous spending habits once the hospitality sector is also allowed to open its doors, said Mr Allen-Reynolds.
Meanwhile, investment rose by 13.5 per cent in the third quarter and exports were up 17.1 per cent following an 18.9 per cent drop in April to June, led by a 20.1 per cent increase in goods exports as factory production reignited.
Most Mediterranean countries posted GDP rises above the bloc's average, with France, Spain and Italy leading the pack, after record contractions in the previous quarter.
Looking ahead, Mr Allen-Reynolds said the eurozone economy will contract again in the fourth quarter, by a predicted 3 per cent.