Eu­ro­zone growth, eclips­ing US econ­omy, set to be best in decade

Kuwait Times - - Business -

BRUS­SELS: The eu­ro­zone’s an­nual eco­nomic growth rate out­stripped that of the United States in the third quar­ter set­ting up 2017 as the best year for the cur­rency area since fi­nan­cial mar­kets crashed a decade ago. Ger­many was a ma­jor fac­tor, but even some of the bloc’s lag­gards, such as Italy, showed signs of re­vival. Euro­stat, the Euro­pean Union sta­tis­tics of­fice, con­firmed a pre­lim­i­nary es­ti­mate that euro zone gross do­mes­tic prod­uct (GDP)grew 0.6 per­cent from July to Septem­ber from the pre­vi­ous quar­ter and on a year on year ba­sis was 2.5 per­cent higher.

This was higher than the 2.3 per­cent year-on-year rate for the US econ­omy, which had been grow­ing faster than the euro zone. The US quar­terly num­bers were slightly bet­ter than the eu­ro­zones at 0.7 per­cent, how­ever. “A ro­bust la­bor mar­ket re­cov­ery, grow­ing ex­port mar­kets, an ac­com­moda­tive mon­e­tary stance, im­prov­ing lend­ing con­di­tions and mod­est in­fla­tion are but a few of the tail­winds that the euro zone econ­omy is ex­pe­ri­enc­ing,” ING econ­o­mist Bert Colijn said.

“Be­cause of that, this could well be its strong­est year for growth since 2007. The eu­ro­zone will likely out­pace both the U.S. and UK in terms of GDP growth in 2017,” he said. Euro zone GDP grew 3.0 per­cent in 2007, and reached 2.1 per­cent in 2010 and 2015.

Partly as a re­sult of the growth, euro zone in­vest­ments have turned in one of their best years since the sin­gle cur­rency was born in 1999, con­found­ing many who had bet on the bloc to be the dis­as­ter play of 2017. The strong eu­ro­zone growth was pow­ered by

the big­gest econ­omy Ger­many, which shifted into an even higher gear in the third quar­ter, pro­pelled by buoy­ant ex­ports and ris­ing com­pany in­vest­ments in equip­ment. Sea­son­ally ad­justed Ger­man GDP rose 0.8 per­cent on the quar­ter, beat­ing a con­sen­sus fore­cast of 0.6 per­cent, which was also the se­cond-quar­ter growth rate.

Se­cond big­gest France grew 0.5 per­cent on the quar­ter and 2.2 per­cent in an­nual terms and the third big­gest Italy beat ex­pec­ta­tions with a 0.5 per­cent quar­terly, and 1.8 per­cent an­nual growth, sup­ported by ex­ports and do­mes­tic de­mand. The Nether­lands, the fifth big­gest econ­omy, grew an ex­pected 0.4 per­cent on the quar­ter af­ter a record jump of 1.5 per­cent in the pre­vi­ous three months, putting it on track for a 3.3 per­cent ex­pan­sion this year, the strong­est since 2007.

Out­side the bloc, euro zone growth also ex­ceeded that of Bri­tain, the EU’s se­cond-ranked econ­omy which will leave the bloc in March 2019. The Bri­tish econ­omy, af­fected by a drop in the pound against the euro since last year’s Brexit vote, ex­panded 0.4 per­cent on the quar­ter in ster­ling terms and just 1.5 per­cent an­nu­ally.

Separately, Euro­stat said eu­ro­zone in­dus­trial pro­duc­tion fell by 0.6 per­cent month-on-month in Septem­ber as ex­pected by mar­kets but rose 3.3 per­cent year-on-year, slightly beat­ing economists’ av­er­age fore­cast of a 3.2 per­cent in­crease. “The out­look for pro­duc­tion in the fourth quar­ter re­mains strong,” ING’s Colijn said. “New or­ders for man­u­fac­tur­ing surged in Au­gust and busi­nesses are re­port­ing large back­logs of work ac­cord­ing to the PMI sur­vey.

“That should re­sult in con­tin­ued strength in in­dus­try in the fi­nal quar­ter of the year, adding to the pos­si­bil­ity that our es­ti­mate for GDP growth in 2017 of 2.3 per­cent could still be too low,” he said.

The stronger growth sup­ports the Euro­pean Cen­tral Bank’s de­ci­sion last month to start wean­ing the euro zone off ul­tra-loose money by say­ing that from Jan­uary it will halve the amount of bonds it buys ev­ery month to 30 bil­lion eu­ros ($35.1 bil­lion). It nev­er­the­less promised years of stim­u­lus and left the door open to back­track­ing. — Reuters

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