The economy keeps pace in Q3 but remains frail nevertheless
A third estimate confirmed that the Eurozone economy kept pace in the third quarter, although the rate of expansion remained subdued. According to Eurostat, GDP increased a seasonally-adjusted 0.2% in Q3 from the previous quarter, matching Q2’s expansion. Q3’s reading was unchanged from the two flash estimates and marks one of the slowest readings in the past six years.
Household spending growth in Q3 accelerated to 0.5% over the previous quarter, from Q2’s 0.2%, amid a low unemployment rate and muted inflationary pressures, cushioning the slowdown in the domestic economy. On the other hand, fixed investment growth sank to 0.3% in Q3 (Q2: +5.7%), although the figure was swayed by the absence of Q3 GDP data for Ireland; in the quarter prior, fixed investment growth skyrocketed in Ireland, thanks to multinational-related activity. Government consumption growth, meanwhile, inched down from 0.5% in Q2 to 0.4%.
The external sector continued to drag on growth, albeit only slightly. Exports picked up pace in Q3, even though they remained subdued, amid an unsupportive external environment (Q3: +0.4% quarter-on-quarter s.a.; Q2: +0.2% qoq s.a.). Meanwhile, import growth slumped, again due to pending data for Ireland, and came in at 0.6% in Q3, from 2.8% in Q2.
Compared with the same quarter of 2018, seasonally-adjusted GDP rose 1.2% in Q3, matching Q2’s increase.
Commenting on the short-term prospects on the Eurozone economy, Peter Vanden, chief Eurozone economist at ING, stated:
“There are gradually more signs that the eurozone economy is bottoming out after a deceleration that started in January 2018. However, for the time being, a strong upturn doesn’t seem to be in the offing implying that 2020 is unlikely to see much stronger growth than we saw in 2019”.