Outlook remains bleak

Although the euro-zone economy grew by more than expected in Q3, helped by solid growth in France and Spain, the overall picture remains fairly gloomy. Euro-zone GDP expanded by only 0.2% q/q, and survey data, such as the Composite PMI, suggest that it barely grew at all at the start of Q4. Although domestic demand is likely to have driven growth in Q3, and we expect this trend to continue, there are signs that the labour market is deteriorating, which in turn suggests that household spending will slow. Surveys of firms’ hiring intentions point to employment growth dropping to rates not seen since 2016, when the bloc was still recovering from the sovereign debt crisis. Meanwhile, the outlook for exports is still clouded by the weakness of the global economy. All told, we are sticking to our view that the euro-zone will continue to eke out only anaemic growth until well into next year.