According to the flash estimate published by Eurostat today, the eurozone economy grew by 0.3% qoq in the third quarter. Detailed country figures are only partially available so far. France, for instance, returned to growth in the third quarter (0.2% qoq), but only avoided a further negative figure thanks to a hefty contribution to growth from inventories (0.6 percentage points). The Spanish economy, by contrast, continued its upswing almost unabated in the third quarter (0.7% qoq).
In our view it is now time to ditch the concerns seen in the summer about a slowdown in the second half of 2016. In the short term at least, the Brexit vote in late June had scant impact on the eurozone economy. Eurozone sentiment surveys (PMI, IFO) suggest that the economy moved up a gear at the start of the fourth quarter. The Italian referendum on constitutional reform scheduled for early December could, in the event of a No vote, cast a slight pall on economic sentiment, but we judge the direct economic repercussions to be low. In 2016 average GDP growth in the eurozone is likely to come in at 1.5%.
Next year political developments could pose more of a downside risk for the eurozone economy again. Although we are expecting a stronger increase in investment, the Brexit negotiations between the UK and the EU in particular could fuel more economic uncertainty and weigh on investment activity in the eurozone. Private consumption is likely to remain the main driver of growth in the eurozone economy next year, although consumer spending is likely to slow slightly in the face of rising inflation. Exports on the other hand should be substantially more dynamic than this year. Overall, we are penciling in a GDP increase of 1.6% in 2017.