Eurozone Q3 GDP Growth Exceeds Expectations

Eurozone GDP 103117

The euro area economy expanded at a faster than expected pace in the third quarter and the unemployment rate fell to a more than eight-year low, while inflation slowed unexpectedly, official data revealed Tuesday.

Gross domestic product climbed 0.6 percent quarter-on-quarter, but the rate was slightly slower than the revised 0.7 percent expansion seen in the second quarter, preliminary flash estimate published by Eurostat showed.

Economists had forecast the sequential growth rate to ease to 0.5 percent from the second quarter's initial estimate of 0.6 percent.

On a yearly basis, the currency bloc grew 2.5 percent, which was faster than the 2.3 percent rise logged in the second quarter and the expected rate of 2.4 percent.

Eurostat releases flash GDP estimates on November 14.

While the expenditure breakdown has not yet been released, domestic demand has most likely been an important contributor to growth again, given labor market strength and improving investment conditions such as higher capacity utilization and improved lending demand and conditions, Bert Colijn, an ING economist, said.

Preliminary estimate released so far by member nations showed that France's growth slowed marginally to 0.5 percent from 0.6 percent in the second quarter. Likewise, Spain's GDP grew 0.8 percent, slower than the 0.9 percent expansion seen in the second quarter.

The EU28 also grew 0.6 percent sequentially and by 2.5 percent from previous year in the third quarter.

According to preliminary estimate, Eurozone inflation slowed to 1.4 percent in October, while the rate was forecast to remain unchanged at 1.5 percent.

Core inflation that excludes energy, food, alcohol and tobacco, moderated to 0.9 percent from 1.1 percent in the preceding month. The expected rate was 1.1 percent.

The annual fall in inflation was largely driven by a slowdown in energy price growth, to 3 percent from 3.9 percent. Services cost grew 1.2 percent after rising 1.5 percent. Meanwhile, cost of food, alcohol and tobacco, climbed 2.4 percent, faster than the 1.9 percent increase in September.

October's CPI data will have reinforced the European Central Bank's judgement that its inflation goal is not yet in sight, Jennifer McKeown, an economist at Capital Economics, said.

In a separate communique, Eurostat said the unemployment rate reached its lowest level since January 2009. The jobless rate fell to 8.9 percent in September from revised 9 percent in August.

The number of unemployed decreased by 96,000 from the previous month to 14.513 million.

The youth unemployment rate came in at 18.7 percent in September, down from 18.8 percent in August.

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