Blame Trump for a slowdown of the Eurozone GDP

The Eurozone third-quarter GDP rose 0.2% over the quarter while decelerating to 1.7% y/y.
The Eurozone third-quarter GDP increased half the expectations of 0.4% Q/Q rise.
Deceleration of the business sentiment driven by unilateral Trump-led trade wars is taking its toll on business activity and worsening exports.
Subsequent devaluation of Euro reflects the balance as lower Euro compensated partly for weaker external demand.

Mario Blascak, PhD Independent Analyst

While the third-quarter economic slowdown came out on a shockingly low tide, the signs of the economic activity decelerating were already in place for some time. The Eurozone third-quarter GDP rose 0.2% over the quarter while decelerating to 1.7% y/y compared with 0.4% Q/Q and 1.8% y/y ex[ected by the market.

The deceleration in the third quarter economic activity is already in place, but the further slowdown might be ahead.

The manufacturing and services purchasing managers indices for the Eurozone decelerated sharply losing 1.2 points on a composite basis to 52.7 in October. The Eurozone economic activity thus fell to a two-year low in October.

Moreover, German private business activity decelerated to a three-and-a-half-year low in October as the squeeze is felt in new orders mostly with new orders falling into contraction territory with the outlook blurred by Trump’s unilateral trade policy.

According to forward-looking business surveys, the Eurozone fourth-quarter GDP is set to rise by 0.3% Q/Q, but given the low reading for the flash estimate of the third quarter GDP, also 0.2% Q/Q might be a new reality.

“The forward-looking indicators, such as measures of future expectations and new business inflows, suggest further momentum could be lost in coming months,” Chris Williamson, the IHS/Markit chief business economist and the author of the PMI report noted on October 24.

The Eurozone PMIs and GDP growth rate

Author

Mario Blascak, PhD

Independent Analyst

Dr. Mário Bla&scaron;čák worked in professional finance and banking for 15 years before moving to journalism. While working for Austrian and German banks, he specialized in covering markets and macroeconomics.

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