Euro zone economy slows in third quarter

BRUSSELS • Growth in the 19- nation euro zone slowed to 0.3 percent in the third quarter, official data showed yesterday, with the economy in powerhouse Germany cooling as France returned to expansion.

The Eurostat agency said the euro zone economy expanded more slowly than the 0.4 per cent seen in the previous quarter and is in line to grow by 1.6 per cent over the next 12 months.

The slight slowdown was brought on by a stalling Germany economy which also grew by a slower 0.3 per cent, caught by falling demand from China and the Volkswagen pollution scandal.

Export-dependent Germany has seen weakened investment and a spike in uncertainty after a huge emissions scandal engulfed auto giant Volkswagen, Germany's landmark company.

As questions arose over the health of the German economy, neighbouring France posted a return to growth in the third quarter with an expansion of 0.3 per cent after having earlier stalled.

Finance Minister Michel Sapin told Agence France-Presse that the latest figures mean that France's economy will grow "by at least 1.1 per cent" this year as a whole, adding he believed the country had "exited the period of extremely weak growth that had lasted too long".

Bailed-out Greece meanwhile contracted sharply by 0.5 per cent in the third quarter as capital controls this summer threw the economy into disarray. Worryingly as well, the economy in recovery standout Portugal slowed to a standstill as domestic demand fell sharply.

The euro weakened as there was increased speculation that the European Central Bank (ECB) will cut its deposit rate and expand its asset-purchase programme next month. The currency dropped towards a six-month low against the US dollar as the data highlighted the possibility that the ECB could bolster its stimulus programme next month even as the Federal Reserve looks set to raise US interest rates.

ECB president Mario Draghi said Thursday that quantitative easing will be extended if needed.

Mr Peter Rosenstreich, head of market strategy at Swissquote Bank in Switzerland, said: "The monetary policy divergence theme between the US and Europe has been on show this week."

AGENCE FRANCE-PRESSE, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 14, 2015, with the headline 'Euro zone economy slows in third quarter'. Print Edition | Subscribe