Eurozone: Growth falls to over four-year low in Q3
October 30, 2018
The Eurozone economy lost traction in the third quarter, growing at the slowest pace since Q2 2014. According to a preliminary estimate released by Eurostat, GDP increased a seasonally-adjusted 0.2% in Q3 from the previous quarter, which was below Q2’s 0.4% rise and notably below market expectations of a 0.4% increase. Compared with the same quarter of 2017, seasonally-adjusted GDP expanded 1.7% in Q3, which was also considerably below Q2’s 2.2% increase.
Although a breakdown by components is not yet available, a less favorable external environment and softer domestic dynamics likely weighed on growth in the quarter. Economic sentiment fell throughout Q3 amid political uncertainty and firm oil prices and returning inflation may have taken a bite out of consumption. In addition, soft industrial production also likely hurt momentum; however, the slowdown could be transitory given that new emissions test dampened German car production in the third quarter.
Additional data released by national statistical institutes across the Eurozone revealed mixed results in third quarter. Weak manufacturing activity and downbeat business confidence driven by political uncertainty caused the Italian economy to record zero growth in Q3. In contrast, Spain’s economy continued to expand at a healthy 0.6% quarter-on-quarter, buttressed by solid private consumption, while Belgium’s economy picked up steam. More complete GDP data will be released on 14 November and 8 December.
Looking ahead, our panel sees the economy regaining some lost traction in the coming quarters, although the cruising speed will remain below 2017’s highs. Bert Colijn, a senior economist at ING, added:
“With simmering uncertainty impacting investment, a high oil price curbing consumption growth somewhat and external factors affecting the exports outlook, we expect growth to come in at just 0.3% in 4Q. Not much of a recovery, given the sudden drop in growth in 3Q.”