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Despite the Brexit, Eurozone growth is still holding

Between July and September, the GDP of the Eurozone increased by 0.3% from the previous quarter. Optimists believe the reassuring figure. Pessimists, themselves, consider it rather poor. In the third quarter, gross domestic product (GDP) in the Eurozone rose 0.3% from the previous quarter, according to statistics released by Eurostat. This is an increase identical to that of the second quarter. The twenty-eight countries of the European Union, have recorded an average growth of 0.4%, comparable to the second quarter. The latest indicators signal that growth in the euro area has been driven by private consumption.

The good news is that the victory of the British Brexit referendum of June 23 did not create a major negative impact on the euro area activity. “Many of us fear such a scenario, but has not produced, says Gilles Moec, chief economist at Bank of America Merrill Lynch. Up by 0.5% between July and September, British growth was rather neat, and the financial markets have not yielded to the panic. ”

Thanks to this factor, British orders to companies in Eurozone were still intact. And there was no – for now – of contagion through the channel uncertainties “The euro area, by contrast, proved resilient, partly due to the strengthening of its institutions, operated since 2012”, analysis Mathilde Lemoine, chief economist of the Edmond de Rothschild group.

“This 0.3% confirms that the recovery sluggish,” says Nadia Gharbi, the European economy specialist at Pictet. France was rather disappointed with GDP up 0.2% only, while the Spain continues its catch (0.7%). The numbers of Italy and of Germany might not be available prior to November 15.

Faced with weak international demand, affected by the slowdown in China, it is likely that exports to the rest of the world have been rather disappointing. In France, foreign trade has also contributed negatively (- 0.5%) on the third quarter GDP. The trend should continue in coming months. Most economists believe that the GDP of the euro zone should grow 0.3% to 0.5% in the fourth quarter. Over the full year, growth could well be around 1.6%, according to the European Commission, after 1.7% in 2015. Unfortunately, 2017 is already shaping up under less favorable auspices. According to several sources, the Committee of Economic Advisers of the German government has revised its annual forecasts downwards.  In the coming months, the gradual rise in the price oil should indeed continue.

Mario Draghi, the ECB President, should nonetheless maintain the course and extend its support to the economy beyond March 2017 as originally planned. The French presidential elections in April and the German federal elections in autumn 2017 will be dominated by political uncertainties. Number of SMEs and large groups may delay their investment and hiring decisions pending the results.

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