Euro zone growth beats forecasts as France outperforms

The euro zone economy grew quicker than expected last quarter as buoyant consumption offset faltering exports and persistent struggles in Germany’s oversized industrial sector, fresh data from Eurostat showed on Thursday.

The economy of the 20 nations sharing the euro expanded by 0.2% in the third quarter, beating expectations for a 0.1% increase in a Reuters poll, with France and Spain growing well above average, balancing out stagnation in Germany and Italy.

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On an annualised basis, the economy grew by 1.3%, ahead of expectations for 1.2%, a level economists consider to be around its natural rate of growth without stimulus.

Spain remained the best performer among the bloc’s largest economies, growing by 0.6% on the quarter, in line with forecasts, while France expanded by 0.5%, beating expectations for 0.2%. Germany and Italy meanwhile both stagnated.

Thursday’s figures ease pressure on the ECB to cut interest rates any further in the near term as they confirm the bank’s long standing view that the economy is proving resilient to this year’s unusual spike in uncertainty.

While trade tensions, lingering uncertainty and Chinese dumping of surplus goods could still weigh on growth in the months ahead, economists remain relatively upbeat about the outlook and ECB projections suggest that last quarter may have been the worst for some time.

Growth could pick up as past interest rate cuts work their way through the economy, households sit on ample saving, Germany boosts spending, uncertainty over tariffs eases and inventories have already run low.

Indeed business activity, measured by a key purchasing managers survey, is already showing a pick up, sentiment in Germany, the bloc’s biggest nation, is improving and business are becoming more optimistic, partly over lower tariff uncertainty.

But any growth pick up is likely to be modest as the rigid structure of the euro zone economy limits activity, say economists, who predict growth in the 1.2% to 1.5% range for years to come.

Source:  Reuters