Serious implications arise from governmental shutdowns. The success or failure of an outcome may come down simply to how it affects most people. Of course, there is also the weighing of economic destruction versus the number of lives saved.

With Germany and France entering into forced lockdowns again, followed by the United Kingdom, Goldman Sachs is calling for another negative quarter in Europe’s gross domestic product. The firm sees a sharp contraction in the fourth quarter with eurozone real GDP falling by 2.3%.

While a 2.3% contraction may not seem bad, considering the forced lockdowns, Goldman Sachs previously had forecast that real GDP in the eurozone would rise by 2.2%. In short, the newer call is that double-dip recession scenario that investors, economists, business owners and workers all wanted to avoid.

One thing to consider here is that the European snapback recovery in the third quarter was nothing at all like it was in the United States. Third-quarter eurozone GDP was released with a 12.7% growth report. That is impressive on the surface, and it was stronger than what economists were calling for.

The European recovery just was not the same as what was seen in the United States. The initial report indicated that the third quarter’s real GDP increased by 33.1% on an annualized rate in the United States. That was after the second quarter saw a 31.4% real GDP contraction.

Note that there are expectations in the eurozone outlook that Italy and Spain will follow France and Germany with lockdowns. While some of the lockdown efforts are expected to be for roughly a month, Goldman Sachs sees the new restrictions lasting for three months in the eurozone, with a gradual starting back up in February.

On a country-by-country basis, here is how Goldman Sachs sees fourth-quarter GDP in the major economies:

• Germany: −1.5%
• France: −3.8%
• Spain: −2.3%
• Italy: −1.5%

Perhaps the only good news in the updated forecast is that the contraction that awaits is likely to be far less than what occurred earlier in 2020. Also acting as a 2021 catalyst is the expectation that one of the coronavirus vaccines will be widely available by the third quarter of 2021. That is expected to be met by monetary and fiscal support at the government level and strong global growth with stronger growth in the eurozone starting in the second quarter of 2021.

As for the United Kingdom and its new lockdown efforts announced over the weekend, Goldman Sachs sees a 2.4% contraction in its real GDP, with 0.4% growth expected in the first quarter of 2021. The firm originally had projected 3.6% growth in U.K. real GDP for the fourth quarter of 2020.

Lockdowns are a tricky business. This time around, the lockdowns will include the contribution of most factories and delivery services and other services that have been deemed essential. Unfortunately, no economy can vibrant and healthy by any measure when the population is in lockdown mode and unable to go anywhere.

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