Eurozone GDP misses forecast in third quarter

The Eurozone economy expanded less than expected in the third quarter with spending by households propping up activity as exports slowed and – surprisingly, according to Barclays – investment in Germany fell.

According to Eurostat, gross domestic product (GDP) in the 19-country bloc grew 0.3% month-on-month in the third quarter, compared with a 0.4% gain in the previous three months and analysts' expectations for an unchanged reading.

On a year-on-year basis, GDP grew 1.6%, slightly better than the 1.5% gain posted in the previous quarter but short of the expected 1.7% figure.

For Barclays economist Apolline Menut, “the key question is the extent to which real fixed investment will take over consumption as a major growth driver, in a situation where global demand could remain depressed for a longer period than currently foreseen.”

Flat GDP growth in Portugal – due to the political uncertainty - was another negative surprise, while the Dutch economy actually shrunk as global trade slowed down.

"The figures add further support to the already very strong case for additional policy stimulus from the ECB at its next meeting in December," said Jonathan Loynes, chief European economist at Capital Economics.

"We continue to expect both a 10bp cut in the deposit rate and an expansion of the ECB’s monthly asset purchases from €60bn to €80bn."