Disappointment as Germany, France and Italy only post modest growth, while Portugal stagnates and Finland continues to slow. Eurozone GDP misses expectations. France returns to growth, but analysts aren’t impressed. Germany hit by global problems…
Closing summary: Weak eurozone growth puts pressure on ECB
Rather like April Fool’s Day, eurozone GDP day is best enjoyed before lunchtime. So here’s a summary:
Weak international trade helped to drag back Germany and Italy, and limited France’s recovery too.
Only consumer spending came to Europe’s aid, with household expenditure providing much of the growth impetus.
The subdued performance raises the pressure on the European Central Bank to boost its stimulus programmes at its December meeting.
Nick Kounis, head of macro and financial markets research at ABN AMRO bank, called it the “final push” for the ECB to be decisive.
Finance minister Michel Sapin told AFP that France’s economy will grow “by at least 1.1 percent” for 2015 as a whole, adding he believed the country had “exited the period of extremely weak growth that had lasted too long”.
But analysts were less impressed, pointing out that France’s ran a large trade deficit during the quarter. Only stockpiling by companies prevented the economy shrinking.
Germany’s economy also grew by 0.3%, down from 0.4%. The economy ministry blamed weak trade; economists warned that emerging market slowdown is hurting.
But Finland was the real shocker — living up to its reputation as the ‘sick man of Europe’ with a 0.6% contraction.
Only Greece beat expectations – shrinking by a mere 0.5%, not the 1% expected. That tells you something about the accuracy of City forecasts, and the turmoil in the Greek economy this year. When a 0.5% contraction is ‘good news’, you know you’re been through the mire.
But it may mean that Greece’s economy ‘only’ stagnates during 2015.
That’s probably all for today. I’m off to fold up the Eurozone GDP Day banners, and finish up the party punch.
Thanks for reading and commenting; see you next week. GW
A double helping of halušky to Slovakia, which was the fastest-growing member of the eurozone in the last quarter.
But it’s cold potatoes for Finland, which posted the worst performance – even worse than a Greek economy gripped by capital controls:
Here’s our news story on today’s GDP figures (to save new readers scrolling back to 6.15am onwards):
The eurozone’s economy lost steam in the latest quarter as Portugal stalled, Germany slowed and debt-stricken Greece contracted.
Gross domestic product (GDP) across the 19 countries in the single currency bloc rose just 0.3% in the third quarter, according to Eurostat. That defied expectations for growth to hold at 0.4%, according to a Reuters poll of economists. On a year earlier, GDP was up 1.6%, lower than forecasts for 1.7%.
The July to September figures mark a slowdown from eurozone GDP growth of 0.4% in the second quarter and 0.5% in the first quarter and come as the European Central Bank (ECB) hints that it is planning to inject further funds into the eurozone economy to maintain recovery…..
Eurozone markets hit by GDP disappointment
European stock markets have been hit by the news that growth slowed across the eurozone in the last quarter.
The main indices are all in the red, adding to yesterday’s selloff:
Conner Campbell of SpreadEX says the mood darkened as this morning’s data emerged.
Joining a decent French figure and sliding Germany growth were misses by Italy and the Netherlands. Even worse were the performances from Portugal and Finland; the former, so often pointed to as one of the region’s post-crisis success stories, saw no growth at all in the third quarter, whilst the latter, increasingly becoming one of the Eurozone’s most rotten appendages, actually saw its GDP contract by 0.6%.
Given region’s general malaise, the Eurozone as a whole was arguably lucky only to see a 0.1% decline quarter-on-quarter, with its Q3 figure coming in at a forecast-missing 0.3%. Understandably investors weren’t too pleased with these results, meaning even the spectre of more ECB QE (the likelihood of which only increased with this morning’s figures) couldn’t drag the DAX and CAC out of the red.
This chart shows how Italy, Portugal and the Netherlands all missed expectations this morning, dragging the eurozone growth rate down (via Bloomberg)
At just 0.3%, the eurozone economy isn’t growing fast enough to pull unemployment down and drive demand, as Bloomberg economist Maxime Sbaihi explains:
The weakness of the eurozone recovery adds “to the already strong case for the ECB to step up monetary stimulus in December,” says Nick Kounis, head of macro research at ABN Amro Bank.
Kounis added that while Europe’s domestic economy is doing well, it is suffering from weak world trade and deteriorating export markets.
Cyprus has posted another quarter of growth, as its recovery from its 2013 bailout trauma continues.
Cypriot GDP rose by 0.5% in July-to-September, matching the growth in April-June.
That means Cyprus’s economy is now 2.2% larger than a year ago.
The eurozone’s recovery has “ disappointingly lost momentum for a second successive quarter”, says Howard Archer of IHS Global Insight.
The third-quarter slowdown in Eurozone GDP growth appears to have been largely the consequence of negative net trade (this was certainly true of Germany, France and Italy).
This suggests that the benefit to Eurozone exporters coming from the weak euro was offset by muted global growth. Meanwhile, relatively decent Eurozone domestic demand supported imports.
This chart shows how Greece’s economy went into reverse in the last quarter:
Greek economy shrinks
Today’s figures also show that Greece’s faltering recovery has been wiped out in the last three months.
Greek GDP contracted by 0.5% in the July-September quarter, Eurostat says, having risen by 0.4% in April-June.
That’s not a surprise, given the bailout drama this summer which saw banks shuttered and capital controls imposed.
And it’s actually less awful than feared — economists had forecast a 1% contraction:
Eurozone growth slows to 0.3%
Breaking: The eurozone economy grew by just 0.3% in the third quarter of the year.
That’s a slowdown on the 0.4% recorded three months earlier, showing that Europe’s recovery remains fragile and lacklustre despite the huge stimulus measures launched by the European Central Bank this year.
It’s also weaker than expected — economists had expected 0.4% growth.
Brussels officials have pointed to Portugal as an example that tough fiscal consolidation can deliver results. Today’s disappointing (no) growth figures may prompt a rethink….
Portugal’s economy stagnates
More gloom. Portugal’s recovery ran out of steam in the last quarter, just as its political crisis escalates.
GDP was flat in the July-September quarter, after growing by 0.5% in the second quarter.
That’s much weaker than the 0.4% economists had expected, and looks like the weakest quarter in 18 months.
The Portuguese Stats Office says:
Comparing with the second quarter, GDP registered a null change rate in real terms in the third quarter (0.5% in the second quarter).
The contribution of domestic demand was negative, mainly due to the reduction of Investment, while net external demand contributed positively, with Imports of Goods and Services decreasing more intensely than Exports of Goods and Services.
On an annual basis, Portuguese GDP grew by 1.4%, down from 1.6% three month ago.
This comes as Portugal’s left-wing parties vow to overturn its austerity programmes and implement more growth-friendly measures, having overturned its centre-right government this week.
We now have to wait until 10am GMT for the official eurozone-wide GDP reading for July-September.
But it’s already clear that this wasn’t a great quarter for Europe, with a weak trade performance dragging back the three largest eurozone economies.
Economist Fred Ducrozet reckons eurozone growth will fall short of the 0.4% expected, to 0.3%.
While City firm Abshire-Smith reckons the European Central Bank is under even more pressure to ease monetary policy:
Italy growth slows
Here comes Italy’s GDP report….and it’s weaker than hoped.
The Italian economy grew by just 0.2% in the third quarter of 2015, dashing expectations of a 0.3% expansion.
It suggests Italy’s recovery is running out of steam.
GDP rose by 0.4% in the first quarter of 2015, dipping to 0.3% in the second quarter – and now just 0.2% in Q3.
Finland’s economy has now been locked in a painful downturn for the last three years, as this chart from Statistics Finland shows:
That’s via fastFT, which warns:
Finland is used to cold, dark winters, and the experience could stand it in good stead as the Nordic country’s bitter economic cold snap shows no sign of a thaw.
Netherlands grows by just 0.1%
Next up, the Netherlands…. and its economy struggled to grow in the last quarter.
GDP rose by just 0.1% in the July-September quarter, a very modest performance.
And second-quarter GDP has been revised down, to just +0.1% from +0.2% originally.
That left the economy 1.9% larger than a year ago, weaker than forecast.
‘Sick man’ Finland’s economy shrinks by 0.6%
Finland has cemented its growing reputation as one of Europe’s most ailing members.
Finnish GDP contracted by 0.6% in the last quarter, according to new data this morning. That left Finland’s economy 0.8% smaller than a year ago.
The fall in natural resource prices, the demise of Nokia, and the knock-on impact of Russia’s economic problems are all hurting.
Having been one of the cheeleaders for eurozone austerity, Finland now finds itself in a very tough position. It is trying to cut spending to keep its deficit within the limits set by Brussels, which is hurting attempts to return to growth.
Two months ago, finance minister Alex Stubb admitted “we are the sick man of Europe.” Today’s figures don’t challenge that diagnosis.
Slovakia has outpaced its larger neighbours to the west, with growth of 0.9% in the last three months. That’s up from 0.8% in the second quarter.
The Czech Republic has beaten expectations, with growth of 0.5% in the last quarter.
City analysts have been chewing through France’s GDP figures, and they’re not too impressed.
RBC is concerned that inventory-building by companies provided much of the growth:
While Barclays says France’s economy is still vulnerable.
More data. Hungary has missed forecasts by posting annual growth of 2.3% in the last quarter, down from 2.7% three months earlier.
On a quarter-on-quarter basis, Hungary (which isn’t in the eurozone) grew by 0.5%.
Germany’s economy would be in a worse state if consumers weren’t benefiting from cheaper energy costs, points out Holger Sandte of Nordea Markets.
This morning’s figures show that Britain has outpaced its two largest European rivals in the last quarter.
UK GDP grew by 0.5% between July and September, data released last month showed.
That’s obviously better than France and Germany, and also beats America (which grew by around 0.4% in Q3).
Germany’s Statistics Office says that domestic spending was a key driver of growth, while overseas demand for German exports lagged behind:
“Private and public consumption both increased.”
“According to preliminary estimates, growth was held back by foreign trade because imports rose far more strongly than exports.”
Germany’s economy has been dented by problems overseas, says Carsten Brzeski of ING.
Here’s his quick take on today’s growth figures:
The summer weakness of the German industry seems to be more substantial than only a vacation-driven soft spell. The turmoil in emerging markets and the Chinese slowdown have finally left some marks on the German economy.
More generally, the German industry has not managed to accelerate and shift up one gear. Somehow, the weak euro and extremely favourable financing conditions have not fully deployed their full impact on the industry, yet. This is partly the result of weakening external demand but also still the structural lack of investment incentives and projects.
Consumer spending, though, is still strong. More here.
This German GDP report “isn’t overwhelming”, says Bloomberg’s Hans Nichols, but at least the its economy is still growing.
The slight slowdown in the last quarter suggests Germany has been hit by problems in emerging markets such as China.
And as these charts show, 2015 hasn’t been a vintage year for the German economy
Germany posts 0.3% growth
Here comes Germany’s GDP data…. and it shows that Europe’s largest economy grew by 0.3% in the last quarter.
That matches France’s performance, and is a slightly slowdown on the 0.4% recorded in April-June.
Germany’s stats office says that consumer and government spending both rose.
Trade had a negative impact on growth, though, with imports growing faster than exports….
French finance minister Michel Sapin has welcomed today’s GDP data.
He told AFP newswires that France has escaped a long period of very low growth.
Some reaction to the French GDP report:
French GDP: The details
France’s return to growth was driven by household spending (up 0.3%) and business investment (up 0.7%).
But the trade picture is quite ugly. Exports fell by 0.6%, while imports grew by 1.7%.
So net trade actually knocked 0.7% off GDP, but this was compensated by firms bolstering their inventories.
Without that, the figures look worse.
Bloomberg TV flags up that the French economy has generally been sluggish over the few quarters, apart from a healthy bounce at the start of this year:
France’s economy is now 1.2% larger than a year ago, slightly better than the 1.1% annual growth economists expected.
French economy growing again – GDP up 0.3%
France has got eurozone GDP day up and running by returning to growth.
French GDP increased by 0.3% in the last quarter, the INSEE stats office reports.
That follows zero growth in the April-June quarter, which fuelled fears that the French economy was stalling.
Introduction: Eurozone growth figures released
Hang out the bunting and put on the party hats, folks. It’s eurozone GDP day!
We’re about to discover how countries across Europe performed in the third quarter of 2015, from heavyweights like Germany and France to smaller members like Slovakia and Portugal.
Actually, you shouldn’t blow up too many balloons, because we’re probably going to learn that Europe’s recovery remains jammed in second gear.
Economists predict that the eurozone expanded by just 0.4% in the July-to-September quarter. That would match the performance in the second quarter of the year. Better than a recession, but not rapid enough to deal with Europe’s persistent unemployment and debt problems.
A poor number today would suggest that Europe has been hit harder than we thought by problems in emerging markets over the summer. It may also show the impact of the Greek bailout crisis on the region.
But anything stronger than 0.4% would be welcome.
The data will also influence whether the European Central Bank feels forced into taking fresh action to stimulate the eurozone economy – a boost to its bond-buying QE programme is already looking likely.
Here’s how the morning should unfold:
- France: 6.30am GMT / 7.30am CET
- Germany: 7am GMT / 8am CET
- Hungary: 8am GMT / 9am CET
- Romania: 8am GMT / 9am CET
- Czech Republic: 8am GMT / 9am CET
- The Netherlands: 8.30am GMT / 9.30am CET
- Italy: 9am GMT / 10am CET
- Portugal: 9,30am GMT / 10.30am CET
- Greece: 10am GMT / 11am CET
- The eurozone: 10am GMT / 11am CET
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