“Eurozone GDP surprised to the upside in Q3, with economic growth accelerating to 0.4% (0.2% consensus/ABN) up from 0.2% qoq in Q2. Ahead of the aggregate release the upside surprise was expected as the regional data showed upside surprises in France (+0.4 qoq vs consensus: 0.3%), Spain (0.8% qoq vs consensus: 0.6%) and most notably in Germany. Indeed, German growth surprised to the upside with an expansion of 0.2% where instead a contraction in Q3, following the contraction in Q2 – which would have tipped the economy into recession – was expected. However, while the figure is welcome after several downbeat economic stories over the past months, the headline German figure is likely overstating economic momentum in the Euro Area’s biggest economy for two reasons. First, since the Q2 reading was revised lower to -0.3% qoq from -0.1%, resulting in a lower base. Second, while the link between the PMIs and GDP has become looser since the pandemic, PMIs have signalled a further contraction in business activity over the course of Q3.”
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Morten W. Langer
