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Eurozone Q3 GDP Forecasts: Last Update

Several indicators which can be used to update our forecasts concerning Q3 GDP were published this week:

 

1/ France’s merchandise trade deficit widened in September as imports grew at nearly twice the rate of exports, the Customs Bureau said Friday. Note that trade deficit was revised higher in August and July.

 

2/ France’s industrial production decreased for the third successive month in September. In the third quarter, manufacturing production dropped 1.1 percent quarter-on-quarter.

 
3/ Germany’s trade surplus widened in September to a record high in a development that underlines criticism that Europe’s largest economy is not importing enough to boost other economies in Europe.

 

4/ Germany’s federal statistical office said industrial production declined by a seasonally adjusted 0.9% in September.

 

5/ Italy Stats Agency confirmed that Itilian GDP contracted in Q3.

 

As a consequence, we can build our scenarios with a more cautious approach regarding French and Italian contributions. By taking into account the weight of each economy in the euro area (Germany: 27%; France: 21%; Italy: 18%; Spain: 12% and Belgium: 5%), we get the following forecasts:

 

Growth Forecasts
Scenario Pessimistic Central Optimistic
Germany 0.2% 0.3% 0.4%
France -0.1% 0.0% 0.1%
Italy -0.2% -0.1% 0.0%
Spain (1st publication) 0.1% 0.1% 0.1%
Belgium (1st publication) 0.3% 0.3% 0.3%
Others 0.0% 0.1% 0.2%

 

Growth Contributions
Scenario Pessimistic Central Optimistic
Germany 0.054% 0.081% 0.105%
France -0.021% 0.000% 0.021%
Italy -0.054% -0.036% -0.018%
Spain (1st publication) 0.012% 0.012% 0.012%
Belgium (1st publication) 0.015% 0.015% 0.015%
Others 0.000% 0.017% 0.034%
Total 0.006% 0.089% 0.169%
Total (rounded) 0.0% 0.1% 0.2%


 

In the central scenario, growth expectation was revised downward to 0.1% QoQ. It seems that situation will normalize in Q3 with weaker growth both in France and Germany, a smaller contraction in Italy and a rebound in Spain.

Eurozone Q3 GDP Forecasts

Several indicators which can be used to forecast Eurozone Q3 GDP were published this week:

 

1/ Belgian economy grew 0.3% QoQ in Q3 (strongest since Q1 2011).

 
2/ Spanish GDP increased 0.1% QoQ in Q3 (first rebound after nine quarters of contraction).
 

3/ French consumer spending unexpectedly fell in September and in Q3.

 

4/ German real retail sales unexpectedly declined for a second straight month in September.
 

As a consequence, we can build our scenarios with a cautious approach regarding French and German contributions. By taking into account the weight of each economy in the euro area (Germany: 27%; France: 21%; Italy: 18%; Spain: 12% and Belgium: 5%), we get the following forecasts:

 

Growth Forecasts
Scenario Pessimistic Central Optimistic
Germany 0.2% 0.3% 0.4%
France 0.1% 0.2% 0.3%
Italy -0.1% 0.0% 0.1%
Spain (1st publication) 0.1% 0.1% 0.1%
Belgium (1st publication) 0.3% 0.3% 0.3%
Others 0.0% 0.1% 0.2%

 

Growth Contributions
Scenario Pessimistic Central Optimistic
Germany 0.054% 0.081% 0.105%
France 0.021% 0.042% 0.063%
Italy -0.018% 0.000% 0.018%
Spain (1st publication) 0.012% 0.012% 0.012%
Belgium (1st publication) 0.015% 0.015% 0.015%
Others 0.000% 0.017% 0.034%
Total 0.084% 0.0167% 0.0230%
Total (rounded) 0.1% 0.2% 0.2%


 

In the central scenario, based on the main central banks’ expectations, Eurozone growth could reach 0.2% in Q3 2013.

Eurozone Emerges from Recession Thanks to France and Germany

The German and French economies grew respectively by 0.7% and 0.5% in Q2 (faster than the US), pulling the Eurozone out of its longest recession.

 

Eurozone growth was 0.3% from the previous quarter, with its two biggest economies revealing unexpected strength such as Austria (0.2%) and Finland (0.7%). In the meantime, Portugal was the best performer with 1.1% growth due to higher exports. That compared with around 0.4% growth in the quarter (1.7% annualized)  in the United States.

 

Regarding France, economy posted its strongest quarterly growth since early 2011 supported by consumer spending, industrial output and inventories, although investment component fell gain. At the opposite, German economy posted  its largest expansion in more than a year thanks largely to domestic private and public consumption ahead of elections (September 22).

 

On the negative side, the recession is worsening in Netherlands (-0.2% QoQ ; -1.8% YoY) and particularly in Cyprus (-1.4% QoQ ; -5.2% YoY) where the contraction could exceed forecast set by European Commission (-6.7% for 2013) and therefore could challenge the bailout program.

 

Overall, despite some disappointments, Eurozone is on track to technically recover (two positive quarters) in Q3 2013  as several surveys  (Eurozone PMI, Sentix Investor Confidence) show that conditions have improved since the end of June.

 


Source: Eurostat