Eurozone recovery fades as growth stalls
Europe’s revival
from 18 months of recession caught up in the third quarter as exports slowed
and the region’s second-biggest economy turnaround.
Over the
preceding quarter the 17-nation eurozone’s initial estimate of GDP demonstrated
growth of just 0.1%, when the economy grew by 0.3% subsequent to the
contracting for six successive quarters through the depths of the region’s debt
crisis.
Analysts were
foreseeing growth would deliberate as one-off factors like a seasonal bounce
back in German construction dull, but the regional figures were getting frailer
compare to some had expected. Germany’s rate of growth more than halved to
0.3%, while the French economy shrank by 0.1%.
The numbers
verifies doubts that the eurozone is currently under pressure to generate any
actual momentum, as record levels of unemployment, weak investment, tight
credit conditions and government austerity are weighing on demand.
In September,
industrial production and retail sales both drop, and price rises plunged to
0.7%. That encouraged the European
Central Bank to slash interest rates to a fresh record low preceding week
in an attempt to stop the region falling into deflation and stagnation.
And ECB
President Mario Draghi said the bank was ready to take further measures,
including another rate cut, if the move fails to have the desired effect.
Unemployment
won’t start falling until 2015 at the earliest, according to recent EU
forecasts. The European Commission has trimmed its estimate of GDP growth next
year to 1.1%, and said it was too early to declare an end to the region’s
crisis.
Domestic demand
in the eurozone is still very weak with 19 million out of work and wages hardly
rising.
“While there’s
not much difference between the second and third quarter GDP figures, the
deceleration is, psychologically speaking, a major setback for the eurozone,”
said Nicholas Spiro, managing director of Spiro Sovereign Strategy.
German domestic
demand was accountable for most of the thin growth, with a recovery in exports
from countries like Spain and Portugal also helping.
Italy’s economy
had a constant decline, while by much less than in prior quarters, but France
was weaker compared to what was anticipated.
In the previous
week, ratings agency S&P downgraded France on fears the government will be
not capable to reinstate the economy’s competitiveness, and the Organization
for Economic Cooperation and Development weighed in Thursday, influencing the
country to be more determined with its reforms.
It emphasized
reasonably high tax rates, insufficient research and development, strict
product market regulation and barriers to competition in business services.
The uncertain
temperament of the eurozone recovery compares strongly with speedy growth and a
surge in confidence in the U.K., where the topic is now concerning when the
Bank of England will move to constrict monetary policy.
The central bank
raised its growth forecasts on Wednesday and said it expected unemployment to
fall much faster than expected just a few months back. Governor Mark Carney
said he would be prepared to raise interest rates before May 2015 if it was the
right decision for the economy.
