Eurozone economy grows at modest pace

T he 19-country eurozone economy grew at a subdued pace in the third quarter, continuing a shaky upswing amid trade disputes and uncertainty over Brexit.

At the same time, weaker inflation figures cast a shadow over the outlook and presented a challenge for the new president of the European Central Bank, ECB, Christine Lagarde, as she takes office.

Statistics agency Eurostat said Thursday that the economy grew 0.2 per cent in the quarter from the previous three-month period.

The countries that share the euro are growing at a slower pace amid uncertainty over when and how Britain will leave the EU and the United States-China trade dispute, which have weighed on business confidence. The ECB responded in September by launching a stimulus package of bond purchases and an interest rate cut.

Unemployment remained unchanged in September at 7.5 per cent, the lowest since July 2008, as the labour market continues its slow recovery from the 2010-2012 eurozone debt crisis.

But inflation dropped to an annual rate of just 0.7 per cent from 0.8 per cent the month before, underlining the ECB’s struggle to lift it towards its target of just under two per cent.

“The slightly better-than-expected third-quarter GDP figure for the eurozone does not alter the fact that the region is expanding at only a very modest pace,” said Andrew Kenningham, chief Europe economist at Capital Economics. “And forward-looking indicators suggest that it is likely to slow further in the fourth quarter.”

The weak outlook is one of the challenges facing Lagarde as she takes office Friday. She inherits a package of stimulus measures including €20 billion (US$22 billion) a month in purchases of government and corporate bonds by the central bank, a step that pumps newly printed money into the financial system to stimulate more lending, growth and inflation.

AP