Euro zone rebounds in Q3, but still faces slowdown
Stronger growth in France and Belgium led the euro zone's third quarter economic rebound even higher than previously reported, data showed yesterday, but the economy is still heading for a slowdown.
The European Union's statistics office Eurostat said gross domestic product in the euro zone rose 0.8 percent in the July-September period against the previous three months, higher than the previously reported 0.7 percent.
Year-on-year, GDP rose 2.7 percent in the third quarter, well above its potential growth rate which the European Commission estimates at around 2.2 percent. The yearly rate was unchanged from the previous estimate. Economists had expected a result in line with the previous Eurostat report for the quarterly and yearly growth figures. But they said the data, now well in the past, had no impact on the current outlook for a slowing economy.
"Good as the third quarter was for the euro zone, it now seems like distant history as events have moved on apace since then," said Howard Archer, economist at Global Insight.
"Latest data and survey evidence generally indicate that euro zone growth is currently faltering in the face of the credit crunch, very strong euro, higher interest rates and elevated oil prices and slowing growth in some key export markets," he said.
The better result was driven mainly by an upward revision of quarterly growth in the euro zone's second biggest economy France, where the economy expanded by 0.8 percent rather than the previously estimated 0.7.
In Belgium, growth was revised up to 0.5 percent from a previous 0.4.
Economic expansion in the 13 countries that shared the euro in the third quarter of last year was driven mainly by household consumption and investment, which added 0.3 percentage points each to the total. Growing inventories added 0.2 points.
Government spending added another 0.1 percentage point which was offset by a negative contribution from net trade.
Latest surveys and retail sales data for the euro zone show consumers losing confidence as higher prices of oil, food and credit take their toll.
In November and December, however, inflation reached 3.1 percent year-on-year, well above the European Central Bank's target of just below 2 percent.
Economists said however, that despite the above target inflation, the ECB would keep interest rates unchanged today and for most of 2008 because of the faltering growth outlook, which would eventually take the pressure off prices.
"The new year's resolution the European Central Bank should be following is 'watch growth rather than inflation' as inflation is not the risk," said David Brown of Bear Stearns.
"These (GDP) are historical numbers so should not make any difference to ECB thinking right now but all forward indicators show growth momentum is slowing fast. I think the ECB will hold fire on rate cuts until the second quarter," Brown said.
Agencies
(China Daily 01/10/2008 page17)
