Eurozone: Preliminary estimate confirms modest growth in Q3

The Eurozone’s modest recovery continued in the third quarter, undisturbed by the Brexit vote. According to a preliminary estimate, the Eurozone economy increased a seasonally-adjusted 0.3% in Q3 from the previous quarter, which matched Q2’s reading. The result was unchanged from an earlier flash estimate published on 31 October. Compared with the same quarter of 2015, GDP expanded 1.6% in Q3, which was also unchanged from Q2’s result. Q3 was the first quarter to fully incorporate any spillover effects from the United Kingdom’s decision to leave the European Union.

Although the preliminary GDP data did not include a breakdown by components, the Eurozone’s growth story is expected to have remained broadly unchanged. Domestic demand likely remained in the driver’s seat as an improving labor market, low inflation and expansionary monetary policy support economic activity. Meanwhile, the contribution from the external sector was likely muted as subdued demand weighs on Eurozone exports.

Additional data released by statistical offices across the continent showed that France’s economy rebounded in Q3 after contracting in the previous period. Italy’s growth figure surprised on the upside and GDP expanded 0.3% over the previous period, after flat growth in Q2. However, Germany’s growth took a hit and slowed, while activity decelerated in Spain, although growth was healthy. More complete GDP data will be released on 6 December.

FocusEconomics Consensus Forecast panelists expect the Euro area economy to expand 1.6% in 2016, which is unchanged from last month’s forecast. For 2017, panelists expect the economy to expand 1.4%, which is also unchanged from last month’s estimate.