Berlin: Economic growth in the Eurozone slowed more than expected in the third quarter as weaker foreign trade held back leaders Germany and France, and with much of the rest of the bloc underperforming.
The 19-member Eurozone grew by 0.3 per cent in the third quarter, the European Union’s statistics office Eurostat said on Friday, reinforcing expectations that the European Central Bank will expand its monetary stimulus next month.
A Reuters poll had pointed to growth of 0.4 per cent.
“The Eurozone recovery is continuing, but it seems like driving with the handbrake on,” said ING economist Vanden Houte.
“We believe that the ECB has actually already made up its mind and that today’s figures are not strong enough to deter them from going ahead with the intended easing.” On Thursday, ECB President Mario Draghi underlined the bank’s readiness to extend money printing, warning that a key measure of economic health — price inflation — was flagging. ECB policymakers’ next key meeting is on Dec. 3.
Highlighting the weak price pressures in much of the Eurozone, figures from Spain showed inflation there fell 0.7 per cent year-on-year in October.
Spain’s economic growth is otherwise a rare Eurozone bright spot, expanding by 0.8 per cent according to preliminary data issued earlier. Its recovery, however, is failing to bridge a growing gulf between rich and poor, storing up problems for an already-strained social security system.
TRADE DRAG The Eurozone’s two largest economies, Germany and France, both grew by 0.3 per cent in the third quarter but the expansion in both countries was held back by foreign trade as export sectors suffered from a slowdown in emerging markets.
French exports fell 0.6 per cent after growing 1.9 per cent in the prior quarter, statistics office INSEE said. Growth in both France and Germany was buoyed by domestic demand, with gains in consumer spending supporting the expansion.
However, economists said that relying on consumer spending alone to drive growth is risky, especially if domestic investment does not pick up to help offset soft exports.
“It is fair to say that consumers probably saved the day for the Eurozone economy in the third quarter,” said Vanden Houte at ING, adding that falls in energy prices and declining unemployment have likely boosted disposable income.
But he warned: “ ... the boost from the recent fall in energy prices will gradually peter out over the coming quarters.” Underlining the risks to relying on consumer spending for growth, a survey by market research group Deloitte showed families across Europe look set to spend slightly less on average this Christmas, with austerity-hit Greece and Russia showing the steepest declines.
French, British, German and Spanish consumers are among those expected to spend more, the survey showed. The overall decline would also be at a much slower pace than last year, signalling some improvement in sentiment.
FINNISH FUNK On the northern rim of the Eurozone, Finland’s economy contracted 0.6 per cent in the third quarter, putting the economy on track for its fourth consecutive year of contraction in 2015.
Labelled “the sick man of Europe” by its own finance minister, Finland’s output is yet to reach 2008 levels because of a string of internal and external setbacks, including the decline of Nokia’s phone business and a recession in neighbouring Russia.
Aggregated Eurozone growth was lower than expected mainly because growth in Italy, the Netherlands, Portugal and Finland all underperformed market expectations.
Italy, the Eurozone’s third biggest economy, grew 0.2 per cent on the quarter — short of expectations for a 0.3 per cent expansion. The Netherlands grew only 0.1 per cent against expectations of 0.3 per cent. Portugal did not grow at all.
Battered Greece’s economy contracted again, albeit it at a milder than expected pace. Gross domestic product shrank 0.5 per cent in the period as capitol controls hot activity “It is currently hard to see Eurozone growth stepping up a gear,” said Howard Archer, economist at IHS Global Insight.
