Eurozone recovery stagnates in third quarter with meagre growth of 0.1pc
Published 15/11/2013 | 01:00
THE eurozone economy all but stagnated in the third quarter of the year, with France's recovery fizzling out and growth in Germany slowing.
The €9.5 trillion economy pulled out of its longest recession in the previous quarter but record unemployment, lack of consumer confidence and anaemic bank lending continue to prevent a more solid rebound.
In the three months to September, the combined economy of the 17 countries sharing the euro grew by a slower than expected 0.1pc. In the previous quarter it rose 0.3pc – the first expansion in 18 months.
The euro fell to a session low in response.
The French economy contracted by 0.1pc, snuffing out signs of revival in the previous three months. It had been expected to post quarterly growth of 0.1pc and has now shrunk in three of the last four quarters.
German growth slowed to 0.3pc, from a robust 0.7 in the second quarter – but Europe's largest economy clearly remains in much better shape.
France is becoming a focus for concern within the currency bloc. The Bank of France predicts the economy will expand by 0.4pc in the last quarter of the year but the government's labour and pension reforms are widely viewed as too timid.
A report on French competitiveness by the Paris-based Organisation for Economic Co-operation and Development (OECD) warned that it is falling behind southern European countries that have cut labour costs and become leaner and meaner.
"To reduce the economic lag and lost time, France needs to keep up structural reforms," OECD chief Angel Gurria said.
The report will be hard for the government to ignore since it was commissioned by President Francois Hollande.
German growth was fuelled by domestic demand. Exports faltered, another indication of the malaise gripping the rest of the eurozone.
"ECB interest rates are far too low for Germany. Germany will probably grow significantly more strongly than the eurozone," said Joerg Kraemer, chief economist at Commerzbank. "Indicators point to similar growth in the fourth quarter."
The European Commission forecasts the currency area will shrink by 0.4pc over 2013 as a whole before growing by a modest 1.1pc in 2014.
However, with unemployment in the bloc running above 12pc and one in two young people out of work in Greece and Spain, talk of recovery rings hollow.
Compounding the French gloom, private sector payroll data showed some 17,000 jobs were destroyed in the third quarter; while inflation slowed in October to 0.7pc, the weakest level in four years, when France was emerging from a deep recession.
Italy matched France's performance, shrinking by 0.1pc. The Netherlands eked out 0.1pc growth.
Spain reported last month that it had pulled clear of recession in the third quarter, albeit with quarterly growth of just 0.1pc.
Portugal is still struggling with austerity as part of its bailout plan, yet managed to grow by 0.2pc in the third quarter following stunning 1.1 pc expansion in Q2. Unlike other embattled eurozone states, unemployment has started to fall there too.
Ireland has not yet published third-quarter figures. (Reuters)