Brussels (Belgium) (AFP) – The eurozone economy grew faster than expected between July and September, buoyed by Germany’s surprise expansion, official data showed Wednesday. However, experts warned of slow growth in the months ahead. The EU’s official data agency reported that the 20-country single currency area recorded growth of 0.4 percent over the July-September period from the previous three months. France’s Olympic Games boost and better-than-expected Spanish growth also pushed the figure higher than the 0.2 percent predicted by analysts surveyed by Bloomberg.
There will be relief in Europe after fears that Germany would weigh down the eurozone. Europe’s output has, however, consistently grown slower than the United States and China. The US economy grew by 0.7 percent between July and September compared to the previous three months, the Department of Commerce said Wednesday. Analysts expect slower eurozone growth in the final three months of 2024. Bert Colijn of ING Bank noted that Wednesday’s figure was “in part driven by one-offs,” pointing to Ireland’s “notoriously volatile” growth which had a positive effect. “For the quarters ahead, we think it’s fair to expect a slowdown in growth again as the outlook remains weak,” Colijn added. In the previous quarter, the eurozone only grew by 0.2 percent, after 0.3 percent in the first three months of the year. Colijn mentioned that the economy “remains sluggish” and warned that “growth in the fourth quarter is likely to come in lower.”
With inflation in the single currency area now below the ECB’s two-percent target, policymakers have recently turned their attention to growth, accelerating interest rate cuts with more expected soon. There are concerns that with multiple challenges, especially for Europe’s manufacturing industry, the eurozone economy will not grow as much as predicted earlier this year. The European Commission, the EU’s executive arm, has predicted the single currency area to grow by 0.8 percent in 2024 but is set to update its forecasts on November 15. EU economy chief Paolo Gentiloni stated early in October that the bloc’s “previous forecast of 0.8 percent of growth (in 2024) will be not far from the reality.” Economists also warned the eurozone could post weaker growth than expected next year. “We forecast eurozone GDP to grow by just 0.7 percent in 2025 compared to a consensus forecast of 1.3 percent,” said Franziska Palmas, senior Europe economist at Capital Economics research group.
Across the English Channel, British finance minister Rachel Reeves announced higher estimates Wednesday for the UK economy, with forecasts of 1.1 percent growth in 2024 and 2.0 percent in 2025. The picture across the eurozone was mixed. Spain, the eurozone’s fourth-largest economy, posted one of the area’s best growth figures in the third quarter, expanding by 0.8 percent thanks to rising exports, domestic consumption, and a tourism boom. The German economy surprisingly expanded by 0.2 percent quarter-on-quarter, narrowly avoiding a technical recession defined as two consecutive quarters of contraction. Meanwhile, French output received a boost from hosting this year’s Olympic Games, with gross domestic product rising by 0.4 percent in the third quarter. However, Italy stagnated in the third quarter, while Hungary tipped into recession after output contracted by 0.7 percent between July and September. In contrast, Austria grew by 0.3 percent during the same period. Overall, the 27-country European Union recorded growth of 0.3 percent in the third quarter from the previous three months, according to Eurostat.
All eyes will now be on eurozone inflation data for October to be published on Thursday, with expectations of a slight increase. Any rise in the rate of consumer price increases is unlikely to stop the ECB from cutting rates again in December, analysts said, since inflation is still falling faster than the bank had projected. “With surveys pointing to growth slowing and inflation well below the ECB’s forecasts for Q4, we do not think this will prevent the ECB from cutting the policy rate by 50bp (basis points) in December,” stated Palmas of Capital Economics.
© 2024 AFP
