The euro zone economy expanded by 0.4% in the third quarter, according to preliminary data released by the European Union’s statistics agency on Wednesday. Economists surveyed by Reuters had anticipated growth of 0.2%, following a 0.3% increase in the second quarter.
Among the countries, Spain experienced one of the highest growth rates, with a 0.8% rise from the previous quarter, while Ireland, known for its fluctuating figures due to the presence of many international corporations, saw a 2% increase.
Germany, the largest economy in the euro zone, unexpectedly grew by 0.2% in the third quarter, avoiding the recession that some experts had predicted, despite challenges in its manufacturing sector.
Analysts from ING noted that while Germany managed to avoid a technical recession, its economy has only marginally expanded since the beginning of the pandemic, describing the country as a “magnet for negative macro news.”
Experts predict that business activity and consumer confidence in the euro zone will gradually improve in the upcoming months, supported by lower interest rates and moderating inflation.
The European Central Bank reduced rates for the third time this year during its October meeting, responding to a final reading of 1.7% inflation in September and ongoing signs of weak economic activity in the euro area.
Market expectations include another 25-basis-point rate cut by the ECB in its December meeting, with the current deposit facility rate standing at 3.25%. ECB President Christine Lagarde mentioned that the Governing Council had discussed a 25-basis-point cut, but the possibility of a larger reduction has been debated, similar to the U.S. Federal Reserve’s actions in September.
Analysts anticipate a 50-basis-point rate cut in December, despite stronger-than-expected growth figures, as the euro zone’s GDP growth is projected to slow in the fourth quarter, with challenges persisting in Germany’s manufacturing sector and Italy facing the end of construction industry tax incentives.
While some experts believe that the latest GDP data will be followed by an increase in headline inflation, others argue that the euro zone is not currently in a recession, citing Spain’s strong growth and France’s solid performance, partly attributed to the summer Olympics. Euro zone inflation figures for October are expected to be released on Thursday.
