Eurozone: Consumption growth to slow after strong Q3 – ABN AMRO

Aline Schuiling, senior economist at ABN AMRO, notes that Eurozone’s Q3 GDP growth remained unchanged from the flash estimate, at 0.2% QoQ.

Key Quotes

“Looking at the main components, net exports reduced growth by 0.1pp qoq. Fixed investment and government consumption were slightly positive and each added 0.1pp, while inventory building reduced growth by 0.1 pp.”

“The main surprise was a jump in private consumption growth, which accelerated in Q3, adding 0.3 pps to qoq growth, up from 0.1 in Q2.”

“Looking forward, we expect the positive contribution of final domestic demand to growth to decline.”

“Employment growth eased to 0.1% qoq in Q3, down from 0.2% in Q2 and 0.3% in Q1. The deterioration in labour market conditions is also reflected in the fact that the unemployment rate has stopped falling (it has been roughly stable since April) and that consumers have become less optimistic about labour market prospects.”

“The view that private consumption growth is losing momentum was also underlined by a separate report published by Eurostat today, which sowed that the volume of retail sales contracted by 0.6% mom in October, following a 0.2% decline in September. All in all, we expect GDP growth to edge lower to around 0.0.-0.1% qoq in the final quarter of this year and to remain subdued in the first half of 2020.”