Eurozone: GDP to have stabilised in Q3 – ABN AMRO

Aline Schuiling, senior economist at ABN AMRO, expects Eurozone’s Q3 GDP to have been stable during the third quarter after it grew by 0.2% qoq in Q2.

Key Quotes

“In the first place, our forecast is based on the view that the recession in industry intensified in Q3. Industrial production fell by 0.6% qoq in Q2 and the 3mo3m growth rate stood at -1.3% in August, which suggests that the contraction was more pronounced in Q3 than in Q2. This view is underlined by further drops in business confidence in most eurozone countries as well as in the eurozone manufacturing PMIs in Q3.”

“Meanwhile we think that the services sector expanded, albeit at a more moderate rate than the 0.6% qoq that was recorded in Q2. A slowdown in services growth was already pre-signalled by for instance the eurozone services sector PMI and the Ifo business climate indicator for Germany’s services sector.”

“On the expenditure side of the eurozone economy, the weakness in exports that started in early 2018 should have weighed on fixed investment growth. Growth in fixed investment excluding the extremely volatile investment in intellectual property (predominantly in Ireland and the Netherlands) slowed down from 1.3% qoq in Q1 to 0.7% in Q2 and we expect further moderation in Q3.”

“In contrast, private consumption growth probably stabilised in Q3 (at roughly 0.3% qoq) as growth in retail sales slowed, whereas growth in new car registrations strengthened. Finally, the combination of net exports and the inventory building is expected to have had a roughly neutral impact on qoq growth.”