Silke Mayr The Eurozone’s economy grew in the third quarter of 2024, reaching a two-year high. The quarter-on-quarter GDP growth rate increased by 0.4%, driven by higher household spending, government spending, and inventory growth.
Growth Drivers and Net Trade Impact
Household spending played a key role in this growth. Government spending and higher inventories also contributed. However, net trade slightly slowed GDP growth. Imports rose by 0.2%, while exports dropped by 1.5%.
On a year-on-year basis, the Eurozone GDP grew by 0.9%. This was above the second quarter’s 0.5% growth and met analysts’ expectations.
Kyle Chapman, FX markets analyst at Ballinger Group, noted that the stronger-than-expected growth is one reason policymakers are considering a 25bps rate cut instead of a larger 50bps cut. He emphasized the need for the ECB to balance past growth with future uncertainties, particularly due to weak PMIs and political instability in France and Germany.
Ireland’s data showed a remarkable 3.5% GDP growth, which distorted the overall picture.
Germany and Spain Show Mixed Economic Performance
Germany’s GDP grew by 0.1%, missing expectations of 0.2%. Despite challenges like falling competitiveness and high energy prices, Germany avoided a recession.
In contrast, the Netherlands’ economy contracted by 0.8% in Q3 2024, primarily due to lower exports and labor market issues. Italy’s economy also faced difficulties, with decreased net exports, a weak manufacturing sector, and declining consumer and business confidence.
Spain’s economy grew by 0.8%, maintaining the same pace as the previous quarter. The growth was driven by a strong labor market, high consumer spending, and robust tourism. The French economy also saw growth of 0.4%.