Double Dip 📉

Double Dip

Early on, Europe was poised for a strong economic recovery with their amazing handling of the pandemic. Sure, there were a couple of scares in some of the largest countries, but those were dealt with also. Halfway on the other side of the world in the US, the pandemic response was lacking and dimmed the future of the economy. Fast forward a couple of months, and things are completely flipped.

Just recently, it was announced that the eurozone fell into a recession. The eurozone is a group of countries that recognize the Euro as their main currency, and some notable ones are Spain, Italy, Germany, and France. The true definition of a recession is two consecutive quarters of negative growth, and the eurozone just met that threshold. In the last quarter of 2020, they reported a 0.7 percent decrease in GDP, and as the first quarter of 2021 came to an end, the eurozone reported a disappointing 0.6 percent contraction in the GDP. A key part of the economic decline was the mass lockdowns that the European countries placed on their citizens to avoid a deadly third wave of COVID-19. Household consumption was a major issue, especially in Germany, who saw a staggering 1.7 percent decrease in GDP. Out of the main countries, the only one with growth ended up being France, who saw a 0.4 percent increase because of increased consumption and construction.

More importantly, the decrease in GDP was nowhere close to what we witnessed last March. Many economists believe that the future is bright for Europe as vaccinations are continuing to pick up, even though there was a minor halt in the last 6 months. Consumer spending is also projected to rise, which leaves Europe in a good situation to try and catch the US. However, the US, who saw a 1.6 percent rise in GDP, used government stimulus to recover, which looks to be a different approach. Do you think that this recession was a minor scare?   

I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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