Eurozone GDP rises at the slowest pace in four years

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The quarterly GDP data for the Eurozone showed that the pace of growth advanced at the slowest pace in four years.

The decline in the GDP’s pace of growth is attributed to the new emissions standards for cars which pulled down the automobile sector. The new emissions standards also hit the German economy. Besides this, Italy’s GDP was also seen to be responsible for the slower pace of GDP growth.

Eurozone’s statistics agency, Eurostat showed that the economy of the 19-nation bloc advanced 0.2% in the three months ending September 2018. This was half the pace of growth from the previous quarter where GDP rise 0.4% in the three months ending June 2018.

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The quarterly performance was also the worst since the second quarter of 2014, but back then growth was hit due to the crisis in Greece. On a year over year basis, Eurozone GDP growth was seen rising 1.7% which was significantly lower compared to the 2.2% increase seen in the previous quarter.

The second estimate which is due in mid-November is expected to shed more light on the details.

However, Italy’s GDP growth was seen as a significant drag. Details showed that the third largest economy’s GDP stalled during the third quarter. The nation is already facing hurdles in regards to its budget deficit plan.

The European Commission had previously rejected Italy’s draft budget agreement as it raised the deficit to 2.4% of its annual GDP which is three times the already agreed level.

Italy is expected to submit a revised budget in November.

Germany’s car market was also seen to undergo a temporary slump due to the new emission’s standards. Economists, however, expect growth to pick up next year.

The global trade tensions also remain a significant underlying fact. However, trade worries between the U.S. and the Eurozone are much lesser compared with China.

Brexit worries were also seen to be one of the reasons as the EU, and the UK have so far failed to reach an agreement. Meanwhile, the Brexit deadline of March 2019 looms closer.

The French economy was seen doubling in the third quarter. Europe’s second-largest economy expanded at a faster pace in the three months ending September 2018. Domestic demand and exports drove the pace of gains. Official data released last week showed that the French GDP grew at a pace of 0.4% sequentially. This was higher than the 0.2% growth that was witnessed in the second quarter.

On the expenditure side, the GDP growth came from an increase in household consumption expenditure. Household consumption rebounded 0.5% in the third quarter reversing the 0.1% decline in the previous quarter.

The total gross fixed capital formation rose 0.8% which was slightly lower than the 0.9% increase in the previous quarter. On the whole, the final domestic demand that excludes changes to inventory accelerated and added 0.5 percentage points to the GDP growth.

Growth in imports, however, slowed to 0.3% from 0.7% in the previous quarter. Exports, on the other hand, accelerated at a pace of 0.7% from 0.1% previously. As a result, the foreign trade balance helped to contribute positively to the GDP growth adding 0.1 percentage points.

On the other hand, change in inventories posted a drag of 0.2 percentage points to the GDP.

The euro was seen coming under pressure following the release of the data. The ECB meanwhile is seen holding its plans steady to end its QE purchases by the end of the year. The central bank is currently purchasing bonds to the tune of 15 billion euro a month starting October 2018.

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