Eurozone Q3 GDP: New cycle high - Wells Fargo

Analysts from Wells Fargo, explained that third quarter GDP growth in the Eurozone beat consensus expectations, rising 2.5 percent year-over-year. They mentioned that the recovery appears to be increasingly broad-based, but warned that inflation has remained quite tame.

Key Quotes: 

“Real GDP in the Eurozone expanded 2.5 percent year-over-year in Q3, the fastest year-over-year growth rate since Q1-2011. Real GDP grew 0.6 percent on a quarterly basis (not annualized), and both the quarterly and year-ago growth rates were above the Bloomberg consensus. While Q3 GDP data broken down into its underlying demand components are not yet available, today’s print is in line with the continued improvement in the Eurozone economy over the past few quarters.”

“A strengthening labor market in the Eurozone likely helped boost Q3 output. Eurozone unemployment data released today showed the unemployment rate at 8.9 percent for September, down from a revised 9.0 percent in August and the 9.6 percent rate registered to start 2017.”

“Overall output growth and unemployment data reinforce positive economic trends, but inflation in the Eurozone maintained its sluggish pace of growth in October. Advance estimates for CPI inflation showed price growth of just 1.4 percent year-over-year, below the consensus of 1.5 percent. Core CPI excluding food and energy also displayed weakness, with inflation of just 0.9 percent year-over-year. Core CPI growth had been showing some signs of accelerating over the past few months with readings north of 1 percent, but this morning’s reading shows a loss of momentum.”

“With inflation in the euro area remaining benign, a complete removal of policy accommodation remains too aggressive a move for policymakers. The central bank (ECB) kept its three policy rates unchanged, and it continued to stress that they would “remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases.” In short, rate hikes in the Eurozone are likely some ways off still.”