Euro zone economy slows to 0.4% growth in third quarter
Zone growth eased to 0.4% in the third quarter from 0.6% in the second, Eurostat said, but beat economists’ 0.2% forecast. France’s economy contracted by 0.1%…
Eurostat said on Friday that the euro zone economy slows to 0.4% growth in the third quarter, down from 0.6% in the second quarter but above economists’ 0.2% forecast. France’s economy contracted, while Germany posted only modest growth and Italy stagnated.
The figures show an uneven picture across the currency bloc. Spain grew 0.6%, while Ireland recorded 5.5% growth, a headline figure that can swing sharply because of multinational companies operating across borders.
How did the largest euro zone economies perform?
France’s economy shrank by 0.1% over the July to September period. Germany grew 0.2%, while Italy’s economy was flat, according to the figures.
France’s contraction came as the country faced rising borrowing costs. Investors have balked at a political struggle over reducing the high budget deficit and mounting national debt. October also brought growing nationwide unrest over the cost of living and other issues, with some demonstrations escalating into violent and costly rioting.
Germany, the euro zone’s largest economy, expanded only slightly. Spain continued to outpace the bloc’s average, supported by labor market productivity, tourism and domestic demand, alongside a relatively strong fiscal position. The country has also faced mass protests over cost pressures and housing, prompting a snap election to be called for next month.
Ireland’s 5.5% growth stands apart, but its GDP readings are highly volatile and subject to revision. The large number of multinationals based there that do business outside the country can distort the headline measure.
What does slower growth mean for households?
Energy costs are a central concern for household budgets. The European Central Bank said a shock from higher energy prices had not yet fed into second-round effects across the wider economy, but elevated costs could still add pressure to living expenses and transportation.
The ECB held interest rates steady on Thursday and said downside risks to growth had increased. Market pricing points to expectations of one more rate increase this year, while analysts said the central bank may still raise rates in December if energy costs remain elevated.
That leaves households facing pressure from two directions: weak growth in much of the bloc and the possibility that energy-related inflation will keep costs high. Joe Nellis, head of economic research at accountancy MHA, said the euro area was “showing unexpected resilience against a backdrop of considerable economic and geopolitical uncertainty.”
Nellis cautioned that the resilience could conceal longer-running weaknesses, including poor productivity and investment growth, demographic pressures and declining industrial competitiveness. Those challenges matter because they can limit the bloc’s capacity to sustain growth even when headline figures beat forecasts.
He also warned that the outlook for 2027 was complicated by the prospect of further inflationary pressures. “Unless the Middle East crisis is resolved in the very near future, energy and transportation costs will continue to rise, putting even more pressure on the cost of living and household finances at a time when consumer confidence is weak.”
