The slowdown in quarterly euro-zone GDP growth to just 0.2% in Q3 came as a major disappointment, but there are good reasons to expect the economic expansion to regain a little pace in the quarters ahead. For a start, we estimate that about half of the deceleration in Q3 was down to a 7% slump in car production as producers struggled to comply with new emissions testing procedures which applied to all vehicles from September. Second, business surveys suggest that the underlying pace of growth is currently between 0.3% and 0.4%. And finally, the recent weakness of consumer spending has owed much to the continued rise in inflation, which will not be sustained – developments in oil prices alone should knock 1 percentage point off the headline rate in the next six months.
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