Eurozone GDP contracted 0.7% in fourth quarter of 2020

Employment growth slowed to 0.3% in final three months of last year

A woman walks past a closed cafe in Paris, France, in November. Eurozone GDP contracted 6.6% last year on 2019, as the region was hammered by the pandemic. Getty Images

Eurozone output contracted 0.7 per cent in the last quarter of 2020 – slightly worse than expected – after household consumption plummeted amid coronavirus lockdowns across the region.

The drop in gross domestic product in the last three months of the year was higher than an expected quarter-on-quarter contraction of 0.6 per cent, with a 4.9 per cent drop from the same period in 2019, according to the European Union's statistics agency Eurostat. In 2020 as a whole, GDP contracted 6.6 per cent from the previous year as the region was hammered by the pandemic.

Eurostat said the quarterly decline in the last three months of the year followed “a strong rebound in the third quarter” of 12.5 per cent.

Meanwhile, eurozone employment growth slowed to 0.3 per cent in the fourth quarter from the 1 per cent growth seen in the previous three months.

In the last three months of 2020, 157.9 million people were employed in the eurozone, Eurostat said, about 3.1 million fewer than in the same period of 2019.

Like the rest of the world, the effects of the Covid-19 crisis battered the economic bloc last year, which caused an 11.7 per cent plunge in output in the second quarter, the sharpest decrease since records began in 1995.

The main downward drag on GDP in the fourth quarter came from household consumption which fell 3 per cent.

Jessica Hinds, Europe economist at Capital Economics, said the third estimate of eurozone output in the fourth quarter confirmed the economy contracted a little during that period, “driven by weaker consumer spending”.

“Ongoing restrictions mean that another fall in GDP is likely in Q1, while the slow vaccine rollout points to the best of the recovery being delayed into Q3,” she said.

Separately, eurozone inflation was stable in February as coronavirus restrictions weighed on the region's economy ahead of an expected spike in consumer prices in the coming months.

Prices in the 19 countries sharing the euro were 0.9 per cent higher than a year earlier, in line with the rate of inflation in January.