So far, the feared economic slowdown in the euro area in the wake of the Brexit decision has failed to materialise. Economic growth was unchanged in the third quarter at +0.3 per cent quarter on quarter. Apparently the impact of the uncertainty about how Brexit will proceed is limited to some turbulence in the financial markets.
As usual for the publication of its first estimate of economic output, the European statistical office Eurostat has not yet delivered any details of how growth momentum is broken down into its individual components. But the initial results from individual member countries and the available indicators suggest that personal consumer spending was once again an important growth mainstay. This is indicated by stable consumer confidence and solid retail sales figures.
Those member states which have already provided first estimates of gross domestic product growth at this early point in time also delivered largely solid results. Economic growth in the Spanish economy will probably have taken pole position again with a strong growth rate of +0.7 per cent. French gross domestic product, which was previously stagnant, grew by +0.2 per cent in the third quarter. At +0.5 per cent, growth also accelerated significantly in Austria, while the Belgian economy only managed a growth rate of +0.2 per cent quarter-on-quarter.
The outlook for the current final quarter of 2016 does not look so bad. The preliminary publication of the results of the purchasing managers’ survey in the euro area and the EU Commission’s Economic Sentiment Indicator suggest economic growth accelerated notably in October. On the basis of the first survey data, economic growth in the euro area could also have picked up somewhat at the beginning of the fourth quarter.
Along with the economic growth data, a preliminary estimate of the harmonised inflation rate in October has also been published. The rate increased again, up +0.5 per cent compared to the same month in the previous year. Once again, the main reason for the higher inflation rate was the energy price. The background to this is the tapering out of the base effect caused by the oil price. The core rate – i.e. prices for services and non-energy goods excluding food – remained unchanged on the previous month at +0.8 per cent. In the coming months the inflation rate in the euro area is initially likely to continue to accelerate. But the gap to the ECB’s 2-per cent inflation target is also likely to remain large in 2017.