On a hot afternoon in Madrid, Spain, people walk along the iconic Alcalá Street.
Miguel Pereira | Getty Images News | Getty Images
Preliminary data released by the European Union’s statistical agency on Wednesday showed that the euro zone economy grew by 0.4% in the third quarter.
Economists polled by Reuters had expected growth of 0.2%. Follow the group’s 0.3% expansion in the second quarter.
Spain was among the countries with the highest growth rates, up 0.8% from the previous quarter, while Ireland generally recorded growth fluctuating numbers There was a 2% increase due to the higher proportion of international companies based there.
The economy of Germany, the largest economy in the euro zone, unexpectedly grew by 0.2% in the third quarter. That has allowed Europe’s largest economy to avoid the recession predicted by some economists as it grapples with a downturn in its key manufacturing sector.
“Despite avoiding a technical recession, the German economy is still only slightly larger than when the pandemic hit,” ING analysts said in a note on Wednesday, calling the country a “magnet for negative macro news.”
analyst Talking about the Eurozone Amid lower interest rates and cooling inflation, business activity and consumer confidence should pick up cautiously in the coming months.
European Central Bank Interest rate cut for third time this year At the October meeting, headline inflation reached According to the final reading, it was 1.7% in September. European Central Bank Quote Signs of continued weakness in euro zone economic activity were a key factor in the central bank’s decision to cut interest rates in October.
The market has fully priced in another 25 basis point interest rate cut by the European Central Bank at its last meeting of the year in December. The ECB’s key interest rate (deposit facility) is currently 3.25%.
European Central Bank President Christine Lagarde said at a press conference in October that the central bank’s Governing Council had only discussed a 25 basis point rate cut.
Nonetheless, there has been growing discussion over the last month about the possibility that the central bank might choose to cut interest rates more aggressively by half a percentage point (as the Fed did in September). this has become Some ECB policymakers have acknowledged They may soon have to contend with the ECB’s pre-Covid-19 inflation problem, which was persistently below the agency’s 2% target.
Franziska Palmas, senior European economist at Capital Economics, said stronger-than-expected growth would not prevent the European Central Bank from cutting interest rates in December, predicting a 50 basis point cut.
Palmas said euro zone GDP growth will slow in the fourth quarter, with German manufacturing still underperforming and Italy struggling with the end of tax incentives for construction, while inflation will be lower than the European Central Bank’s forecast for the next three months. prediction.
However, Kamil Koval, senior economist at Moody’s Analytics, said headline inflation would rise after the latest GDP data, which would “prevent any talk of deep cuts.”
Eurozone inflation data for October will be released on Thursday.
“This report dispels any doubts about whether the euro zone is currently in recession – it is not the case and such fears are always exaggerated,” Koval said. He said growth was “strong in Spain, strong in France” in part because Summer Olympics.
