Eurozone economy grows faster than expected

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The eurozone economy grew more than expected in the third quarter, official data showed Wednesday, thanks to Germany which defied expectations and dodged a recession.

The EU's official data agency said the eurozone recorded growth of 0.4 percent over the July-September period from the previous quarter.

The figure was higher than the 0.2 percent predicted by analysts surveyed by Bloomberg who had feared Germany would weigh down the eurozone.

But the German economy expanded 0.2 percent quarter-on-quarter, narrowly avoiding a technical recession defined as two consecutive quarters of contraction.

The figures will offer some relief, coming a month after Eurostat revised its data to show the eurozone grew by only 0.2 percent in the second quarter of this year.

But analysts expect slower growth in the final three months of 2024.

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With inflation in the single currency area now below the European Central Bank's two-percent target, policymakers are turning their attention to growth.

The ECB has accelerated its interest rate cuts as economists 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.

Europe's output has been consistently underperforming compared with the economies of the United States and China which have expanded faster.

The United States is set to report another quarter of solid growth later on Wednesday.

Olympics boost

The picture across the eurozone was mixed.

Spain, the eurozone's fourth-largest economy, posted one of the area's largest growth figures in the third quarter, expanding by 0.8 percent thanks to rising exports and domestic consumption as well as a tourism boom.

Meanwhile, French output had a welcome boost 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.

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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Source: AFP