Slower-than-expected
euro zone growth likely to seal more ECB stimulus
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[November 13, 2015]
By Jan Strupczewski
BRUSSELS (Reuters) - Euro zone economic
growth was slower than expected in the third quarter, preliminary data
showed on Friday, increasing market expectations that the European
Central Bank will step up its monetary stimulus to the economy next
month.
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The European Union's statistics office Eurostat said the gross
domestic product of the 19 countries sharing the euro expanded 0.3
percent quarter-on-quarter for a 1.6 percent year-on-year increase
in the July-September period.
Economists polled by Reuters had expected a 0.4 percent quarterly
rise and a 1.7 percent annual increase.
"This outcome is also lower than the ECB’s staff projections, which
would add to the already strong case for the ECB to step up monetary
stimulus in December," said Nick Kounis, head of macro and financial
markets research at ABN AMRO bank.
"If the ECB needed a final push to be decisive, this is it," he
said.
He expected the ECB to step up the pace of it government bond-buying
program by 20 billion euros per month to 80 billion, signal that
such purchases would go on beyond September 2016, and expand the
eligible universe of assets.
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Reuters reported this week that the ECB was considering regional and
municipal bonds as an option.
"We also expect a 10 basis point reduction in the ECB’s deposit
rate," Kounis said.
Economists said the slower third-quarter growth was likely to be a
result of negative net trade with the rest of the world, which was
clear in the case of Germany, France and Italy.
"This suggests that the benefit to euro zone exporters coming from
the weak euro was offset by muted global growth," said Howard
Archer, economist at IHS Global Insight.
"Meanwhile, relatively decent euro zone domestic demand supported
imports," he said.
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But Eurostat data showed that the euro zone had a seasonally
unadjusted trade surplus of 20.5 billion euros in September with
exports rising one percent and imports falling one percent
year-on-year.
Aggregated euro zone growth was lower than expected mainly because
growth in Italy, the Netherlands, Portugal and Finland all
underperformed market expectations.
The euro zone's two biggest economies, Germany and France, both grew
in line with expectations at 0.3 percent on a quarterly basis.
But the third biggest Italy, with 0.2 percent quarterly growth, fell
short of expectations of a 0.3 percent expansion and the Netherlands
grew only 0.1 percent against expectations of 0.3 percent.
Portugal did not grow at all in the third quarter and Finland's
economic contraction was bigger than expected.
(Editing by Jeremy Gaunt.)
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