Eurozone economy grows more than expected / Photo: JORGE GUERRERO - AFP/File
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Eurozone economy grows more than expected
The eurozone economy grew faster than expected between July and September buoyed by Germany's surprise expansion, official data showed Wednesday, but experts warned of slow growth in the months ahead.
The EU's official data agency said the 20-country single currency area recorded growth of 0.4 percent over the July-September period from the previous three months.
France's Olympics 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 been consistently underperforming compared with the economies of the United States and China which have expanded faster.
The US economy grew by 0.7 percent between July and September compared with the previous three months, the Department of Commerce said on Wednesday.
Analysts expect slower eurozone growth in the final three months of 2024.
Wednesday's figure was "in part driven by one-offs", Bert Colijn of ING Bank said, pointing to Ireland's "notoriously volatile" growth which had a positive effect.
"For the quarters ahead though, 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.
- ECB focus on growth -
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.
There are fears 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 said 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.
- Olympics boost -
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 and domestic consumption as well as a tourism boom.
The German economy surprisingly expanded 0.2 percent quarter-on-quarter, narrowly avoiding a technical recession defined as two consecutive quarters of contraction.
Meanwhile, French output had a nice uplift from hosting this year's Olympic Games, with gross domestic product rising 0.4 percent in the third quarter.
But Italy stagnated in the third quarter, Eurostat data showed.
Hungary tipped into recession after output contracted by 0.7 percent between July and September, while Austria in stark contrast grew by 0.3 percent in 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 will be unlikely to stop the ECB 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," said Palmas of Capital Economics.
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W.Widmer--HHA
