Euro area GDP to show resilience in Q3

Friday's preliminary Q3 GDP data for the euro area should point to another quarter of resilient growth (0.3% qoq) driven mainly by private consumption. The slowdown from Q2 (0.4% qoq) is mainly due to Greece where the effects of capital controls are likely to take a heavy toll.

In addition, forward-looking indicators still point to above-trend GDP growth in Q4, countering the worst fears of a sharp slowdown due to the external headwinds. This fits well with economists view since August that the euro area recovery should show some resilience as it is mainly driven by private consumption in the wake of rising real incomes, lower energy prices, less fiscal austerity, improving labour markets and an accommodative monetary policy. However, downside risks still dominate, with the outlook for trade and industrial production remaining bleak in the near term, thereby also weakening the investment outlook.

"We see less need for the ECB to add more easing in December, but in line with our long-term view of inadequate core inflation pressures, we expect the ECB to take substantive action in December. This long-term battle against lowflation is however made much more difficult in view of the low growth potential in the euro area", says Societe Generale.