Eurozone growth in the third quarter was better than expected, with Germany avoiding an expected recession, official figures showed.
The growth rate for the 20 countries that use the euro rose from 0.2% to 0.4%. In the European Union, which has 27 member countries, GDP increased by 0.3%. Analysts had expected production to rise 0.2%.
Germany, the euro zone's largest economy, saw its gross domestic product (GDP) expand by 0.2% in the three months to September, beating analysts' expectations for a 0.1% contraction, compared to 0.0% in the previous quarter. .It increased from a 3% decrease.
However, compared to three months in 2023, German output fell by 0.2%, showing that the economy is not improving. Last year it shrank by 0.3%, but this year it has completely shrunk.
According to the German government's autumn economic forecast, the economy will contract by a further 0.2% this year, leaving the country far behind G7 countries. This month, the International Monetary Fund raised its forecast for the UK's gross domestic product (GDP) growth rate this year to 1.1% from 0.7%.
Intensifying competition with China in the auto sector, soaring energy prices after Russia's invasion of Ukraine, and political instability resulting from a split in the three-party ruling coalition are holding back German production. Automaker Volkswagen announced this week that it would close three plants and make thousands of employees redundant.
Carsten Brzeski, global head of macro at Dutch bank ING, said the data “brought welcome relief to Germany's devastated soul.” However, this does not erase the fact that the economy remains in stagnation. At least we are not in a deep recession. ”
France's economy accelerated faster than expected in the third quarter, thanks to increased spending from the Paris Olympics in August. GDP growth rate was 0.4%, up from 0.2% in the second quarter. On an annual basis, production increased by 1.3%.
Christine Lagarde oversees three interest rate cuts this year
Reuters
Italy's economy was flat in the third quarter, growing 0.2% less than expected, while Spain's GDP grew more than expected at 0.8%.
The latest eurozone GDP figures show that growth in the common currency area has been stimulated by the European Central Bank's decision to cut interest rates from a record high of 4%.
ECB President Christine Lagarde has overseen three interest rate cuts so far this year, bringing the deposit rate down to 3.25%, and analysts expect further policy easing next year.
Tomasz Wieradek, chief European economist at asset management firm T. Rowe Price, said that if Donald Trump were to win the U.S. presidential election, the ECB would said it could significantly reduce borrowing costs by 50 basis points (bp). Elections are next week.
Inflation across the eurozone fell sharply to 1.7% in September from 2.2% the previous month.