Two Largest Eurozone Economies Continue to Grow
The eurozone’s two largest economies continued to experience positive growth in the three months through September. The German economy expanded by 0.7% in the third quarter, while the French grew by 0.3%. The eurozone economy as a whole expanded by 0.4%, confirming that it has now emerged from recession.
Duncan Higgins, senior analyst at Caxton FX, said: “The figures will certainly be welcomed, particularly by those fearing the double-dip recession. However, the market had forecast slightly stronger numbers for both economies. This confirms the fragility of the recovery and suggests that concerns will not yet be erased. Indeed, the euro has lost ground to the UK currency in the wake of the news, although the pair remains relatively range bound.”
Analysts cited stronger exports and consumer spending, as well as government stimulus packages, contributed to the continued growth.
Importantly, the figures do highlight the fact that the UK is the only prominent G20 economy to still be in a technical recession, having unexpectedly contracted by 0.4% in the third quarter. However, while the UK economy struggles to expand, eurozone unemployment, now at 9.8%, could put pressure on their own growth prospects.
Higgins said: “In the longer term, the jobless burden risks putting serious pressure on future growth in the EU. Policymakers are still very aware of the steep hill that must be climbed and they cannot yet risk withdrawing stimulus measures.”
In the wake of the news, the single currency has actually slipped back slightly against the pound as investors note that the figures disappointed market expectations. The pound has reached a high of 1.1215 this morning and is now attempting to consolidate its position over 1.12. However, the euro has posted gains against a weaker dollar, pulling back from heavy losses incurred yesterday.