Econintersect: Third quarter GDP for the EU-17 (Eurozone) failed to show a strengthening recovery with a growth of only 0.1% quarter-to-quarter. This was in line with expectations of economists and reactions have therefore been subdued or positive. For example, stocks were up strongly across Europe, led by gains over 1% in both Paris and Frankfurt. These two exchanges surged in spite of the decline in GDP growth for both France and Germany. Italy was also weak while Spain and the Netherlands ended recessionary growth with GDP gains for the quarter.
Click on graph for larger image.
Graph from Eurostat.
Germany saw GDP grow at 0.3% for the third quarter, down from 0.7% growth in the previous quarter. France actually recorded negative growth (-0.1%), down from 0.5% for the second quarter.
Year-over-year GDP was down by 0.4%.
The greater EU-28 grew by 0.2% in the third quarter, according to Eurostat, the official data source for the EU. This was down from the second quarter which was up 0.3%, the same as the Eurozone.
The following highlights were posted by Markit:
- GDP up 0.1% compared with second quarter
- Growth in Germany and Spain contrasts with downturns in France and Italy
- PMI points to slightly better growth at start of fourth quarter
Graphics from Markit:
The following is the text of the press release from Markit:
Economic growth ground to a near standstill in the euro area in the third quarter, reflecting a renewed downturn in France and a near halving of growth in Germany. However, the region’s periphery continues to show signs of reviving, and the region is on course expand at a slightly stronger, though still modest, pace in the fourth quarter.
The data go a long way to vindicate the ECB’s decision to cut interest rates to re-stimulate growth across the single currency area.
Pay-back from strong second quarter
The euro area economy grew just 0.1% in the third quarter, weaker than expected, according to official data compiler Eurostat. The easing was in some ways to be expected, as the second quarter had shown a surprisingly strong upturn. GDP rose 0.3% in the three months to June, contrasting with the PMI business surveys which had signaled an ongoing downturn.
Reassuringly, the business surveys, which often show a smoother underlying trend compared to the relatively noisy official data, suggest that the region’s recovery remained on track at the start of the fourth quarter, although the upturn continues to look both fragile and weak. The October Markit Eurozone PMI remained at a level consistent with just 0.2% quarterly GDP growth, though most importantly it has signaled a marked turnaround in the region’s economic health compared to the start of the year.
The surveys suggest that we should not read too much into these GDP numbers in terms of growth slowing. More likely, the second quarter numbers overstated growth from which we are seeing some third quarter pay-back, and that we are looking at an ongoing but very modest recovery.Trends varied markedly within the region. Looking at the largest member states, Germany grew 0.3%, down from 0.7% in the second quarter, and Spain is estimated to have grown by 0.1%, pulling out of a recession that started in the first quarter of 2011.
However, both France and Italy saw GDP fall 0.1%. The drop in Italian GDP was the ninth successive quarterly decline, but was notably the smallest quarterly fall seen over this period. The downturn in France contrasted with a 0.5% expansion in the second quarter, an upturn that had always looked like an anomaly according to the more downbeat survey data.
In terms of GDP levels, the Eurozone economy is still 3.0% smaller than its pre-crisis peak. Of the largest member states, only Germany has exceeded its prior peak, with GDP up 2.6%. The French economy remains 0.3% smaller, while Spain and Italy are 7.4% and 9.1% smaller respectively. By comparison, the UK economy is still 2.5% smaller than is pre-crisis peak while the US is 5.3% larger. Japan has edged up 0.1% on its prior peak.
All data reported today are preliminary (“flash”) estimates, subject to revision with the second estimate for the third quarter scheduled for 04 December 2013.
Sources:
- Euro area GDP up by 0.1% and EU28 up by 0.2% (Eurostat, 14 November 2013)
- Eurozone economic growth falters to just 0.1% in third quarter (Markit, 14 November 2013)
- Euro Zone Economy Stalls as Germany and France Backtrack (David Jolly and Jack Ewing, The New York Times, 14 November 2013)
