Growth Momentum Picks Up In The Eurozone But Inflation Slows

Summary:

Eurozone flash GDP estimates show economic activity expanded 0.6% on the quarter in Q3 2017

Second quarter GDP was revised higher to 0.7% from 0.6%

Inflation weakened in October as flash inflation data showed core CPI rising 0.9% and headline CPI rising 1.4%

December ECB meeting will see release of the economic projections

Inflation downgrades could be possible if consumer prices remain muted in the next month or two

Overall activity in the Eurozone suggests ECB’s view on extending QE until September 2018

Eurozone Q3 GDP rises 0.6%

The preliminary estimates for the third quarter GDP from the Eurozone released last week showed that the real GDP rose 0.6% on a quarterly basis. The third quarter GDP slowed rather marginally compared to the revised 0.7% quarterly GDP growth in the second quarter.

EU Q3 GDP: 0.6%

Further data is expected which will show the expenditure components which could provide key insights into the GDP data. However, domestic demand is expected to stay robust underlining the solid growth momentum.

On a regional basis, France and Spain GDP numbers released showed that real GDP rose 0.5% and 0.8% respectively during the quarter. The data suggested that annual GDP growth in France was in line with government estimates at 1.8%.

The leading indicators in the euro area such as the PMI activity showed that overall economic growth remains consistent with the preliminary GDP data although growth is expected to marginally fall towards the end of this quarter.

Inflation weakens in October

On the inflation front, the latest flash inflation figures showed that consumer prices eased during the month of October. Core inflation rate posted a large drop, rising just 0.9% on an annual basis for the period ending October.

This was the annual low in core inflation in May this year. Although the ECB does not look at the core inflation data, this is expected to be a significant component that can signal the underlying price pressures.