The slightly positive GDP sequential rates in Germany and Franceof 0.2% in both cases could not fully offset the negative developments inItaly(-0.2%) and Spain(-0.3%) and the surprise slump in the Netherlands (-1.1%). As a result, the eurozone economy as a whole contracted by 0.1% in the third quarter. Today’s figures demonstrate that Francedoes not have comparably grave problems akin to those in Italy or Spain. Looking ahead, the French government will doubtless come under more pressure to follow suit with sweeping reforms of its own along the lines of those in the current problem countries. However, in the current situation it is understandable that President Hollande is shying away from measures that could prompt a slump.
In the final quarter of 2012 the sequential GDP growth rate is also likely to be slightly negative. October saw further deterioration in key sentiment indicators and industrial capacity utilization slipped further to 76.8% (long-term average 81.3%). For full-year 2012 we are expecting the eurozone economy to contract by 0.3%. The upward trend that will set in next year is likely to be subdued, generating economic growth of only ½%. We are assuming that, above all, political progress towards more European integration and the ongoing external adjustment in the problem countries will help to gradually curb the debt crisis. In addition, the relatively low external value of the euro will bolster the economy. Consolidation of public-sector finances will continue to exert a drag in 2013, but less so than this year. After today’s figures we still see no acute grounds for the ECB to cut rates, it should keep the little powder it still has dry (we expect key rates to remain unchanged at 0.75% until the end of 2013).