The eurozone economy showed unexpected resilience in the third quarter of 2024, expanding by 0.4% quarter-on-quarter, as revealed in Eurostat’s preliminary flash estimates. This growth, doubling the forecasted 0.2%, marks the eurozone’s strongest expansion since the third quarter of 2022 and reflects improved performance in key economies, including Germany and France. In contrast, the European Union’s economy grew at a stable 0.3% rate, matching the previous quarter.
Year-on-year, seasonally adjusted GDP rose by 0.9% in both the eurozone and the EU, underscoring steady recovery across the region despite broader economic uncertainties.
Germany and France Outperform Expectations
Germany, the eurozone’s largest economy, saw a 0.2% GDP increase, defying predictions of a slight contraction. Data from Germany’s Federal Statistical Office highlighted that this growth followed a revised 0.3% contraction in the second quarter. The country’s recovery was primarily driven by increased government and household consumption, though challenges remain. Economists still project that Germany will end 2024 with a 0.2% GDP decline, its first consecutive annual recession since the early 2000s following a 0.3% downturn in 2023.
France, meanwhile, posted a robust 0.4% GDP increase, building on its 0.2% growth in the second quarter. The surge was fueled by household consumption and government spending, partly attributed to post-Olympics economic activity in Paris. According to INSEE, the national statistics agency, household consumption rose by 0.5% due to increased spending on goods, energy, and information services. While trade contributed modestly to growth with both exports and imports declining, fixed investment saw a downturn, mainly in manufactured goods and services.
Diverse Economic Outcomes Across Eurozone Members
In a diverse performance across the bloc, Ireland led with a notable 2.0% quarterly GDP rise, followed by Lithuania and Spain, which saw increases of 1.1% and 0.8%, respectively. However, some eurozone members faced setbacks: Hungary, Latvia, and Sweden recorded economic contractions. Italy, the third-largest eurozone economy, stalled with no growth, missing the forecasted 0.2% expansion after a modest 0.2% gain in Q2.
Market Reactions and Economic Indicators
Financial markets reacted to the positive economic news with the euro rising 0.3% to 1.0840 against the U.S. dollar on Wednesday. European sovereign bond yields remained steady, with Germany’s benchmark Bund yield holding at 2.3%.
Despite the strong GDP data, European stocks faced losses amid broader concerns from Asian markets and upcoming economic events in the U.S. Italy’s FTSE Mib was the hardest hit among major indices, declining 1.3% as stocks in Campari and Stellantis saw significant drops. France’s CAC 40 index slipped 0.9%, driven by downturns in luxury stocks such as Kering and LVMH, which fell 3.8% and 2.5%, respectively. The Euro Stoxx 50 index dropped 0.9%, impacted by declines in luxury brands, Dutch tech firm ASML Holding, and major European banks.
Investor attention now turns to key economic reports anticipated later this week. Germany’s October inflation report, set for release later today, and eurozone-wide inflation data due tomorrow are expected to influence market expectations ahead of the European Central Bank’s next policy meeting. These figures could shape the ECB’s stance on future interest rate decisions as it navigates the path between stimulating growth and controlling inflation.
