Global Daily – Further loss of eurozone growth momentum

by: Aline Schuiling

Euro Macro: Q3 GDP growth to have weakened – Eurostat will publish its first flash estimate of eurozone GDP growth tomorrow. This probably will show a decline from the 0.4% qoq growth rate recorded in Q2. To begin with growth in the big car manufacturing economies such as Germany and Italy was temporarily depressed by a drop in car production due to new emission testing standards. The central banks of Italy and Germany each have already communicated that growth came more or less to a standstill in Q3. Besides the temporary reduction in growth in Germany and Italy, eurozone growth in general was weighed down by a further export-led slowdown in the industrial sector on the back of weaker global trade growth. This was also reflected in further declines in the eurozone as well as the global manufacturing PMIs after the summer. Moreover, consumption growth – although supported by strong labour and housing markets – probably continued to be weighed down by a rise in headline inflation in Q3. All in all, we expect growth to have slowed down to 0.2% qoq in Q3, which is somewhat below the trend growth rate of around 0.3-0.4%. An outcome in line with our forecast would be below the consensus of 0.4% and could add further fuel to the scaling back of ECB rate hike expectations we have seen over recent days.