Eurozone: Growth plunges to over four-year low in Q3
November 14, 2018
A more complete dataset confirmed that the Eurozone economy lost traction in the third quarter. A second preliminary estimate by Eurostat revealed that GDP grew at the slowest pace since Q2 2014, increasing a seasonally-adjusted 0.2% in Q3 from the previous quarter and thus matching the first flash estimate. This was below Q1 and Q2’s 0.4% rises and a sharp deterioration from the stellar 0.7% pace seen throughout most of 2017. 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, while 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 weak dynamics in the third quarter. Germany’s economy contracted for the first time in over three years amid plunging fixed investment and a negative contribution from the external sector. Italy’s economy, meanwhile, stagnated due to poor manufacturing activity and downbeat business confidence driven by political uncertainty. In contrast, France’s economy picked up steam and Spain’s economy continued to expand at a healthy 0.6% quarter-on-quarter, buttressed by solid private consumption. More complete GDP data will be released on 8 December.