Vuetify hangs on custom error page in statically generated project

[Strahinja]

Steps to reproduce

1. yarn create nuxt-app errtest

   ✨  Generating Nuxt.js project in errtest
   ? Project name errtest
   ? Project description Nuxt error page test
   ? Author name Страхиња Радић
   ? Choose programming language JavaScript
   ? Choose the package manager Yarn
   ? Choose UI framework Vuetify.js
   ? Choose custom server framework None (Recommended)
   ? Choose Nuxt.js modules Axios, DotEnv
   ? Choose linting tools ESLint, StyleLint
   ? Choose test framework None
   ? Choose rendering mode Universal (SSR)
   ? Choose development tools (Press <space> to select, <a> to toggle all, <i> to invert selection)
   yarn run v1.22.4
   $ eslint --ext .js,.vue --ignore-path .gitignore . --fix
   Done in 2.60s.
   
   �  Successfully created project errtest
   
     To get started:
   
          cd errtest
          yarn dev
   
    To build & start for production:
   
          cd errtest
          yarn build
          yarn start
   
   Done in 279.09s.

2. cd errtest

3. Edit nuxt.config.js (add after build section):

   generate: {
     fallback: true,
   },

4. I used Apache local virtual server named http://errtest serving errtest/dist folder as document root. Edit static/.htaccess:

   <IfModule mod_rewrite.c>
     ErrorDocument 404 /404.html
     RewriteEngine On
   
     RewriteBase /
     RewriteRule ^index\.html$ - [L]
   
     RewriteRule \.html$ - [L]
   
     RewriteCond %{REQUEST_FILENAME} !-f
     RewriteCond %{REQUEST_FILENAME} !-d
     RewriteRule . /index.html [L]
   </IfModule>

5. yarn generate

6. Navigate to http://errtest (works), then for example to http://errtest/nonexistant. Custom error page is shown with the text "404 Not Found", but clicking any nuxt-link, such as the bottom one titled "Home page", or the "Inspire" menu item, seems to somehow corrupt the Vue internal state. Navigation menu can be opened, but any nuxt-link such as the "Inspire" menu item doesn't display the inspire.vue page, even though URL seems to be updated to http://errtest/inspire.

[Strahinja]

I was able to confirm this is specifically an issue of create-nuxt-app. I made a test app in Codesandbox.io by forking the codesandbox-nuxt repository and set it up to use @nuxtjs/vuetify. After generating and deploying to Netlify, the error page on the website doesn't have the issue.