Consumption and Investment Propel Euro-Area Economic Growth

Private consumption and investment drove euro-area economic growth in the third quarter, underpinning a recovery that has spread across the 19-nation bloc.

Consumer spending contributed 0.2 percentage point to gross domestic product, with gross fixed capital formation adding another 0.2 point, the European Union’s statistics office said on Thursday. The economy expanded 0.6 percent from the second quarter, unrevised from an earlier estimate.

The data come as European Central Bank officials brace for updated economic projections and a first outlook for growth and inflation in 2020 — published after their final policy meeting of the year on Dec. 14. With business confidence at the highest level in 17 years, order books filled to the brim and unemployment steadily declining, policy makers may be presented with stronger numbers.

Current forecasts already anticipate that 2017 was the economy’s best year in a decade, and Governing Council member Jens Weidmann has hinted that the 2.2 percent growth in the ECB’s book may still understate the strength of the recovery.

Momentum as measured by a survey of purchasing managers accelerated to its fastest pace in over six years in November, setting the scene for a buoyant end to a year.

“The recovery in the euro area continues to develop robustly and employment has increased markedly,” ECB executive Board member Yves Mersch said on Wednesday. “Wages, as well as underlying inflation, seem to have made a trend reversal.”

Sufficiently strong price pressures are one of the few missing ingredients of the euro area’s upswing. At 1.5 percent, inflation is still running below the ECB’s goal of below but close to 2 percent.

Policy makers have promised to keep supporting the economy. At their October meeting, they extended asset purchases to at least September, albeit at a reduced pace, and pledged to keep interest rates low until well after buying stops.
Source: Bloomberg

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