As China slowdown hurts exports

Eurozone economy cools

GMT 14:22 2015 Friday ,13 November

Arab Today, arab today Eurozone economy cools

Growth in the eurozone slows to 0.3% with Germany cooling
Brussels - Arab Today

Growth in the 19-nation eurozone slowed in the third quarter as low demand from China hurt Germany and applied a stiff handbrake on an already weak recovery in Europe.

The disappointing data overrode news of the return to growth in France and fueled speculation that the European Central Bank will expand its stimulus programme next month as it battles low inflation and a sluggish economy in the currency bloc.

The Eurostat agency said gross domestic product in the eurozone grew 0.3 per cent between July and September, from 0.4 per cent growth during the second quarter.

This was below the 0.4 percent expected by analysts and meant the eurozone would grow by an unexceptional 1.6 percent over the next 12 months.

"Bottom line: the Eurozone recovery is continuing, but it seems like driving with the handbrake on," said Peter Vanden Houte, analyst at Dutch lender ING.

"With the emerging countries still in the doldrums, little acceleration is to be expected in the coming quarters," he said, adding that the figures were too weak "to deter the ECB from going ahead" with more stimulus.
The slight slowdown was accentuated by a stalling Germany economy that grew by a slower 0.3 percent, caught by falling demand from China and other emerging economies as well as fallout from the Volkswagen pollution scandal.

"As in the US and the UK, growth lost some momentum in the Eurozone over the summer," said Holger Schmieding of Berenberg Bank.

"The recession in some major emerging markets and the slowdown in China are taking their toll on export-oriented manufacturing," he added.

Export-dependent Germany has also seen a blow to investor confidence after a huge emissions scandal engulfed auto giant Volkswagen, the country's landmark company.

- France rebounds -

As questions arose over the health of the German economy, neighbouring France posted a return to growth in the third quarter with an expansion of 0.3 percent after having earlier stalled.

Finance Minister Michel Sapin said the latest figures meant France had "exited the period of extremely weak growth that had lasted too long".

Of the big eurozone countries, Spain grew the fastest with a 0.8 percent rate in the third quarter, though this was a slowdown from 1.0 percent in the previous three-month period.
Analysts agreed that the slowdown in emerging economies led by China undermined any benefit of a weaker euro that has fallen by about 20 percent in the past year against the dollar.

"Softer external demand appears to have muted any beneficial impact on exports from the lower euro," Jonathan Loynes, Chief European Economist at Capital Economics.

"We have long warned that growth could slow further ahead as the temporary boosts from lower oil prices and the weaker euro start to fade," he said.

Predictably, bailed-out Greece contracted sharply by 0.5 percent in the third quarter as the debt crisis and capital controls this summer threw the economy into disarray.

Although Greece had a record tourism year, gains were lost to the chaos stemming from the six months battle between the leftist government of Alexis Tsipras and international creditors.

More worryingly, the economy in recovery standout Portugal slowed unexpectedly to a standstill as domestic demand fell sharply.

Across the whole 28-nation EU, the economy expanded by 0.4 percent in the quarter, on course for 1.9 percent growth over 12 months.
Source: AFP

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