Eurozone: Another modest decline in GDP in Q4 followed by a slow recovery – Rabobank

FXStreet Insights Team FXStreet

In the third quarter, the Eurozone economy contracted by 0.1% compared to the second quarter. Economists at Rabobank expect that the Eurozone will enter a mild recession, followed by a period of sluggish growth.

The start of a recession?

The Eurozone economy contracted by 0.1% in the second quarter, with a wide variation among member states.

A sizeable share of companies still indicates that the tight labour market hinders their production. On balance, companies don’t expect their headcount to shrink soon.

We expect some loosening of the labour market going forward but don’t expect a steep rise in unemployment. This will put a floor under the economic contraction, especially since we expect real wages to rise soon, but will also continue to hinder activity in several sectors.

We expect another modest decline in GDP in Q4 followed by a slow recovery. The war in the Middle East is a clear downside risk to our outlook, however.

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