Eurozone Q3 2019 GDP to hold steady

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The European statistics agency, Eurostat will be releasing the preliminary GDP report for the third quarter today.

During the three months ending September 2019, economists are optimistic that the eurozone economy grew at a pace of 0.2% on a quarterly basis. This brings the yearly GDP growth rate to 1.2%.

The GDP data based on the estimates shows no major deviation. The pace of growth will show that the eurozone economy grew at the same pace as in the second quarter. This is somewhat good news.

The data comes amid speculation that growth could slow much more than initially thought. The eurozone economy has been largely stagnant, inflation included. This has become a major worry for the European Central Bank.

Euro GDP
Euro Area, GDP

As a result, the ECB restarted its quantitative easing program in September. This comes after the central bank initially announced an end to its QE program in December 2018. But within less than a year, slowing growth and sluggish inflation pushed the ECB to take action.

However, in a way, the expectations for the third quarter show that the pace of growth was not as bad as it initially seemed.

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Overview of PMI’s for the Eurozone

The various measures of the purchase managers’ index covering manufacturing and services were weaker during the three months ending September. On average, the eurozone manufacturing PMI was at 46.4.

A reading in the PMI below 50 indicates contraction. In the three months, the manufacturing PMI was consistently below the 50-level, suggesting a decline.

Meanwhile, services activity was somewhat better. Overall, in the three-month period, the average of the services PMI was seen at 52.76. This was slightly better comparing to the manufacturing sector.

The declines during the quarter were largely attributed to the global trade wars. At one point, the US administration also threatened Europe with tariffs. The dispute came on the back of Europe extending sops to airplane manufacturer Airbus.

This put the American airplane manufacturer, Boeing at a disadvantage.

Quite recently, the WTO ruled in favor of the U.S. allowing it to legally impose tariffs on imports from the Eurozone.

All Eyes on the German Economy

The German economy was also going through a slump during the period. Considering that Germany is the eurozone’s largest economy, a slowdown can create ripples across the whole region.

At some point, there were talks that the eurozone economy could slip into a recession.

This was because of uncertainty from the German economy. In August, industrial orders fell more than expected due to weaker domestic demand. This raised concerns that the region’s largest economy would slip into a recession.

Contracts for goods fell 0.6% and this led the Bundesbank to issue caution that growth could slow. But, there was some hope as, in September, data saw the German industrial production rebounding.

Following the 0.6% decline in August, Germany’s industrial production saw a modest recovery. Industrial production rose 0.3% in September. While this brought some cheer to the markets, not everyone is convinced.

Economists and investors alike are likely to wait for more data before writing off the slump.

For the moment, the 1.2% growth expectations in the third quarter stay consistent with the economic data coming out so far. As long as the data doesn’t disappoint the market reaction could be muted.

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