Euro zone economic growth unexpectedly slowed in the third quarter, underscoring the vulnerability of the region's recovery as the European Central Bank examines the need for fresh stimulus.
Gross domestic product in the 19-nation bloc rose 0.3 per cent, data showed Friday, down from 0.4 per cent in the previous period. Germany and France’s economies each grew 0.3 per cent, while Italy’s expanded 0.2 per cent.
With a slowdown in emerging markets testing the strength of the pick up in the currency union, the data will provide ECB president Mario Draghi with more visibility heading into December's monetary policy meeting.
The central banker has signaled additional stimulus is in the pipeline, citing renewed downside risks for growth and the region’s inflation outlook, which risks becoming entrenched well below the ECB’s goal of 2 per cent.
GDP missing estimates for the currency bloc adds "to the already strong case for the ECB to step up monetary stimulus in December," Nick Kounis, head of macro research at ABN Amro Bank in Amsterdam, said before the euro-area data were published.
“The domestic economy has been doing well, but the euro zone faces external drags, with world trade growth weak and exports to emerging markets falling like a brick.”
Speaking at the European Parliament on November 12, Draghi said the outlook for core inflation, which removes volatile items like energy, had “somewhat weakened,” while noting that downside risks from a global slowdown are “clearly visible.”
“What we’ve seen in the data leading up to this is very low-end industrial production, and missed expectations, and weak factory orders, so any kind of suggestion that this is a result of infiltrated weakness coming from emerging markets will release expectations that Draghi will act,” said Eimear Daly, a currency strategist at Standard Chartered.
“It’s quite highly priced in the market that he is going to do something at the December meeting.”
The euro weakened after the data, dropping toward a six- month low against the dollar.
Bloomberg
