ECB to increase bond- buying after Euro Area growth dips
The European Central Bank (ECB) is expected to increase the scale of its bond-buying programme after disappointing growth data for the Euro Area were published on Friday.
Following strong US jobs data in October, the Federal Reserve may raise the key US federal funds rate for the first time since 2006, at its policy meeting on 15-16 Dec while Mario Draghi, ECB president, has given strong hints that the governing council may expand its €60bn a month asset-purchase program in December and also extend the programme beyond its intended run through September 2016.
More quantitative easing (QE) in Europe and a rise in US rates would push down the value of the euro down but including trade with non-Euro Area EU member states, intra-regional trade makes up almost 70% of total exports and there is no magic wand that can easily counter the plunge in demand from emerging economies led by China.
Intra-Euro Area trade accounts for almost half of total Euro Area trade.
Seasonally adjusted gross domestic product (GDP) rose by 0.3% in the Euro Area (EA19) and by 0.4% in the EU28 during the third quarter of 2015, compared with the previous quarter, according to flash estimates published by Eurostat, the statistics office of the European Union. In the second quarter of 2015, GDP grew by 0.4% in both areas.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.6% in the Euro Area and by 1.9% in the EU28 in the third quarter of 2015, after +1.5% and +1.9% respectively in the previous quarter. During the third quarter of 2015, GDP in the United States increased by 0.4% compared with the previous quarter (after +1.0% in the second quarter of 2015). Compared with the same quarter of the previous year, GDP grew by 2.0% (after +2.7% in the previous quarter).
Both Greece and Finland reported quarterly and annual contractions (see chart below).
Both Austria and The Netherlands grew by only 0.1% in the quarter while Ireland, Sweden, Denmark and some others did not provide estimates of growth.
In 2014 Germany, France, Italy and Spain accounted for 77% of Euro Area GDP.
Destatis, the German federal statistics office, reported on Friday that the German economy has shown continued moderate growth: In the third quarter of 2015, GDP rose 0.3% on the second quarter of the year after seasonal adjustments.
In the first half of the year, the GDP had also increased moderately, that is, by 0.4% in the second quarter and by 0.3% in the first quarter of 2015.
In a quarter-on-quarter comparison, positive contributions were made mainly by domestic final consumption expenditure. The final consumption expenditure of both households and government was up again. By contrast, GFCF (gross fixed capital formation) investment dipped slightly. According to provisional calculations, foreign trade also had a negative effect on growth because the increase in imports was markedly larger than that of exports.
In a year-on-year comparison, economic growth accelerated slightly. The price-adjusted GDP in the third quarter of 2015 was up by 1.8% (1.7% when calendar-adjusted), following a 1.6% increase in the second quarter and a 1.2% increase in the first quarter of 2015 (1.6% and 1.1%, respectively, when calendar-adjusted).
The economic performance in the third quarter of 2015 was achieved by 43.2m people in employment, which was an increase of 343,000 or 0.8% on a year earlier.
France's National Institute for Statistics and Economic Studies (Institut National de la Statistique et des Études Économiques: INSEE) reported Friday that in Q3 2015, GDP in volume terms increased by 0.3%, after a flat performance in Q2 2015 (0.0%).
Household consumption expenditure recovered (+0.3% after 0.0%). Non-financial enterprises' GFCF (gross fixed capital formation) investment accelerated slightly (+0.7% after +0.5%) and that of households declined less than in Q2 (-0.5% after –1.1%). Overall, total domestic demand (excluding inventory changes) accelerated: it contributed for +0.3 points to GDP growth after +0.1 points in Q2. Exports fell back (–0.6% after +1.9%) while imports sped up (+1.7% after +0.5%). The foreign trade balance contributed negatively to GDP change (–0.7 points after +0.4 points in the last quarter). Conversely, changes in inventories contributed positively (+0.7 points after –0.4 points).
Istat (Istituto Nazionale di Statistica) reported Friday that in Q3 GDP increased by 0.2% on the second quarter of 2015 and by 0.9% in comparison with the third quarter of 2014.
Spain's National Statistics Institute (Instituto Nacional de Estadística) reported on 30 Oct that GDP rose by 0.8% in the third quarter of 2015, as compared to the previous quarter, according to the flash estimate of quarterly GDP. This rate was two tenths lower than that registered in the previous quarter (1.0%).
The annual growth rate was 3.4%.
“Judged by monthly trade data, both export and import growth slowed markedly over the quarter, with export growth slowing faster than that of imports,” Gizem Kara, an economist with BNP Paribas said. “We believe this trend is set to continue over the coming quarters.”
The Euro Area (EA19) includes Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland. The European Union (EU28) includes Belgium, Bulgaria, the Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, Sweden and the United Kingdom.