Economics

Eurozone growth and inflation remain steady

Both are expected to rise in the fourth quarter, potentially creating a conundrum for the European Central Bank.

31/10/2016

Azad Zangana

Azad Zangana

Senior European Economist and Strategist

GDP inline with consensus

Eurostat released its preliminary estimate of eurozone GDP, showing the currency union maintained a steady pace of growth.

GDP rose by 0.3% in the third quarter, unchanged from the previous quarter and matching consensus expectations.

So far, only France and Spain have released early estimates, with the former seeing a weaker-than-expected pick-up in growth to 0.2% (previously -0.1%), but the latter enjoying steady and robust growth of 0.7%.

Eurostat also released the preliminary estimate for eurozone inflation, recording a slight acceleration from 0.4% year-on-year (y/y) in September to 0.5% y/y in October. Core inflation (excluding energy, food, alcohol & tobacco) remained steady at 0.8% y/y.

Can growth accelerate?

Overall, the data released today are in line with expectations and the signals from business surveys.

However, the latest business surveys report a pick-up in activity, which suggests growth can accelerate heading into the end of the year.

Meanwhile, inflation is also due to rise, largely due to the impact from lower energy prices dropping out of the annual comparison.

Eurozone inflation could rise as high as 2% by the end of the first quarter of next year, which could pose a problem for the European Central Bank as it remains keen to keep stimulus going.

For more on this, please see the latest Economic and Strategy Viewpoint.