Economy

Euro Area GDP Still Escapes Contraction in Q3

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Among all the problems in Europe and the post-Brexit woes, the European Statistics agency (Eurostat) has released its first view of third-quarter seasonally adjusted gross domestic product (GDP). The preliminary flash estimate showed that GDP rose by 0.3% in the euro area (EA19), and it rose by 0.4% in the broader European Union (EU28) nations.

In the second quarter of 2016, the seasonally adjusted GDP rose by 0.3% in the EA19 and by 0.4% in the EU28. The third quarter of 2015 had shown that seasonally adjusted GDP rose by 1.6% in the EA19 and by 1.8% in the EU28 in the third quarter of 2016, after +1.6% and +1.8% also in the previous quarter.

Reuters was calling for 1.6% in the EA19 area for the annual reading and 0.3% for the quarterly reading. In short, this number was more or less in line with the consensus.

The numbers might sound fine when you consider how the European Central Bank has been buying assets, but that action should highlight how weak things really are in Europe. The combined economic output of the 19 currency members rose by 1.4% on an annualized basis — less than half of the growth seen in the United States GDP reading released last Friday.

Another issue to consider is that the post-Brexit move had less of an impact than some of the more extreme views were touting. Some believed that the post-Brexit move would set Europe up for an instant recession. Still, this rate of growth is low enough that it just does not support the hoped-for inflation targets.

Note that the euro area (EA19) includes Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland.

The European Union (EU28) includes all of the euro area countries and also Bulgaria, the Czech Republic, Denmark, Croatia, Hungary, Poland, Romania, Sweden and the United Kingdom.

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