Euro area flash GDP growth softens further in Q3 on issues in automotive industry

The euro area economic growth softened again in the third quarter. The flash estimate showed that the real GDP grew just 0.2 percent quarter-on-quarter, significantly softer than anticipated. This signifies another halving of the growth rate compared with the initial half of 2018.

The soft growth is partially because of a special impact, noted Commerzbank in a research report. The issues in the automotive industry with the certification of vehicles according to the new emission test procedure have left deep traces, particularly in Germany. The German real GDP growth is likely to have stagnated in the third quarter on a sequential basis.

Unchanged growth in Italy is also likely to be linked to problems in the automotive industry, among other things. On the contrary, the Spanish economy maintained its pace of growth in the third quarter, whereas the French growth came in higher at 0.4 percent.

The issues in the automotive industry might be resolved in the fourth quarter. This is likely to distort growth upwards in the December quarter.

“In view of the falling sentiment indicators, it is anything but certain whether the underlying growth rate of the first half of the year will be reached again. The danger of a trade war between the US and China, the risk of a hard Brexit or the prospect of further economic slowdown in China could dampen companies' willingness to invest”, added Commerzbank.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bullish at 106.932, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 76.7237. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex