Eurozone: Weak momentum expected to extend into 4Q19 - BBVA

According to the Research Department at BBVA, the latest economic reports from the Eurozone show some improvement in growth and inflation figures, but they warn that risks persist. 

Key Quotes: 

“Eurozone growth stabilized at 0.2% QoQ in 3Q19, slightly better than expected, underpinned by the resilience of domestic demand. Private consumption and investment gained some ground across countries. Germany grew slightly driven by the significant contribution of net exports.”

“Hard data up to September point to a halt in the deterioration of manufacturing and exports, while retail sales grew at a steady pace driven by still improving labour market conditions. The increase in exports was pushed by those to the UK, but weak foreign orders point to a still gloomy external outlook ahead.”

“Weak momentum expected to extend into 4Q19. Our MICA-BBVA model projects Eurozone quarterly growth to remain broadly steady at low levels (0.1%-0.2% QoQ). Combined with slightly higher growth in 3Q19, this puts a slight upward bias to our projection of annual GDP growth of 1.1% in 2019.”

“Risks remain tilted to the downside. The probability of a hard Brexit or higher car tariffs in the short term seems to have declined, but could arise again next year. Political noise in several countries (more recently in Germany and Italy) could delay progress towards much needed reforms in the Eurozone.”