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France and Italy drive EU rebound as Germany and Spain lag behind


The eurozone’s financial rebound from the pandemic gathered tempo within the three months to September, as elevated family spending boosted progress in France however provide chain bottlenecks led to a slowdown in Germany and forged a shadow over the ultimate quarter.

The image from third-quarter progress figures printed by the eurozone’s 4 largest economies confirmed that France and Italy had rebounded strongest, with progress that comfortably outstripped expectations at 3 per cent and a pair of.6 per cent respectively.

Nevertheless, there was gloomier information in Germany, the place progress was slower than anticipated within the third quarter at 1.8 per cent, marking a slowdown from 1.9 per cent for the earlier quarter.

Spain, in the meantime, reported progress effectively beneath expectations at 2 per cent. Whereas effectively up on its 1.1 per cent growth within the second quarter, this left Spanish gross home product effectively beneath pre-pandemic ranges.

The eurozone as an entire has lagged behind the worldwide financial system’s restoration from the pandemic over the previous yr. However it’s anticipated to shut the hole with third-quarter progress of two per cent, when GDP figures are launched for the bloc in a while Friday, a quicker charge of progress than the US and China.

Line chart of Real GDP, rebased Q4 2019=100 showing Eurozone economies narrow the gap with pre-pandemic levels

On Thursday, the US reported third-quarter GDP progress of 0.5 per cent from the earlier quarter, whereas China had already stated its financial system grew 0.2 per cent in the identical interval.

Nevertheless, China’s financial system rebounded above its pre-pandemic stage final yr and the US did the identical within the second quarter. The eurozone is predicted to hit this measure of restoration solely by the tip of this yr.

At the moment, the hole between German output now and within the fourth quarter of 2019 earlier than the pandemic struck, is 1.1 per cent, Italy’s has narrowed to 1.3 per cent, whereas France has nearly returned to pre-pandemic ranges. Spain’s hole is 6.6 per cent.

One nagging issue is that the availability chain bottlenecks and surging vitality costs which have held again manufacturing unit manufacturing and are pushing up inflation will weigh on euro space progress within the final quarter of 2021.

These points have prompted the German authorities to slash its progress forecast for this yr. Berlin stated this week that it anticipated 2.6 per cent progress this yr, down from a forecast of three.5 per cent on the finish of April, whereas it raised its prediction for 2022 progress from 3.6 to 4.1 per cent.

Germany’s federal statistical workplace stated progress within the third quarter was primarily pushed by “increased family consumption expenditure” within the interval.

French finance minister Bruno Le Maire described French progress as “an distinctive outcome”, which meant the nation was “heading in the right direction”. France’s rebound was powered by a 5 per cent rise in family spending and a 2.3 per cent improve in exports.

That lifted general French output progress above the two.1 per cent anticipated by most economists and marked a pointy acceleration from the upwardly revised 1.3 per cent progress within the earlier quarter.

Italy’s GDP rose 2.6 per cent within the three months to September following a robust 2.7 per cent rebound within the earlier quarter, official knowledge confirmed. This was higher than the two per cent progress forecast by economists polled by Reuters.

Presenting the federal government’s 2022 finances, Italy’s prime minister Mario Draghi stated on Thursday that the financial system “will develop this yr by greater than 6 per cent, most likely effectively above”. This is able to be the quickest tempo since 1976 because the nation rebounds from its largest financial downturn — in 2020 — because the second world warfare.

Spain’s rebound was fuelled by 7.9 per cent progress in output from the hard-hit sectors of retail, transport and hospitality, following a pointy rebound in tourism over the summer time, an essential supply of financial revenues.

Manufacturing manufacturing in Spain additionally expanded for the primary time this yr. Nevertheless, family consumption within the nation slipped regardless of excessive charges of Covid-19 vaccinations.

Provide chain disruptions and rising vitality costs pushed Spanish client inflation to five.5 per cent in October, the very best charge in additional than 30 years, threatening dwelling requirements and client spending. French inflation additionally accelerated to a 13-year excessive of three.2 per cent.

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