Another strong quarter for eurozone GDP
Lead — The eurozone continues to showcase surprising resilience, maintaining higher than expected growth rates despite an ongoing energy crisis, as detailed in the latest analysis from ing-think. The third quarter saw GDP growth slip from 0.6% to 0.4%, yet this performance remains above trend amidst rising energy prices and inflation pressures. While countries like Ireland show exceptional growth influenced by multinational activities, major economies like France and Italy are faltering. Amidst this backdrop, key market levels and potential rate adjustments by the ECB remain critical for trader focus.
What the desk is arguing
The desk posits that despite declining quarterly GDP growth to 0.4%, the eurozone economy appears resilient, defying conventional recessionary expectations. Per the full note from ing-think, this resilience can largely be attributed to a positive real wage environment and ongoing industrial benefits from technological advancements and increased defense spending.
The growth in Ireland (5.5%) is noteworthy but should be viewed skeptically due to its multinational accounting influences, as the growth patterns in core economies like Germany (growth down to 0.2%) and France (contracted by 0.1%) signal more caution. Such disparities suggest that while the aggregate figures may look robust, underlying weaknesses may prompt future downgrades.
Where it sits in our coverage
Our consensus target for EUR/USD is 1.075, with a range spanning from 1.04 (bofa) to 1.10 (jpmorgan) for March 2026. The desk's view is optimistically aligned with jpmorgan at the higher end of this forecast range, emphasizing the importance of sustained growth alongside rising energy costs.
How other firms see it
Firms like jpmorgan and credit suisse hold similar bullish perspectives on the eurozone's resilience, suggesting that growth catalysts may outweigh short-term inflationary pressures. On the contrary, bofa offers a more conservative stance, anticipating weakening as energy prices continue to rise.
Upcoming navigation of the EUR/USD trajectory should closely align with ECB monetary policy shifts and global market reactions, positioning markets to respond dynamically to potential ECB rate increases or economic indicators linking inflation to growth.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Eurozone GDP growth remains at 0.4%, above trend but declining.
- 02Disparities in growth rates highlight underlying economic challenges, particularly in larger economies.
- 03Ireland's growth is heavily skewed by multinational activities, warranting cautious interpretation.
- 04Future ECB policies and energy price trends will critically impact eurozone economic resilience.
Market implications
Watch for volatility around the 1.075 level as a potential breakout or reversal point. Additionally, monitor any ECB communications surrounding interest rates that could exacerbate market dynamics in response to the current economic landscape.
Risks to this view
Any unexpected acceleration in energy prices or a tightening of ECB monetary policy could force a reassessment of growth projections in the eurozone, necessitating a potential reversal in market sentiment and positioning.
Older quick take Quick take Published 10:35 Another strong quarter for eurozone GDP Quarterly GDP growth dropped from 0.6% to 0.4% in the third quarter, but remains well above trend. Despite a worsening energy shock, the economy continues to be resilient Despite a worsening energy shock, the eurozone economy continues to show resilience Should it be this strong? The eurozone economy seems to have shrugged off the Middle East crisis.
In fact, growth has accelerated markedly since the war began at the end of February, a seemingly counterintuitive development for a major energy importer. Then again, the impact on inflation has been mild so far and real wage growth is still positive. Industry is increasingly feeling the effects of higher energy costs, but is also benefiting from the tech boom and increased defence and infrastructure spending.
Ireland experienced another strong quarter with 5.5% growth, although the figure was heavily influenced by multinational accounting activity and is therefore less indicative of underlying economic conditions. Beyond Ireland, third-quarter growth was less impressive Most large eurozone economies experienced weaker quarter-on-quarter growth in 3Q, with France contracting by 0.1% and Italy stagnating. Spain and the Netherlands still experienced strong growth of 0.6% (down from 0.7% in the previous quarter).
Germany – happy to still grow at all – did see growth drop from 0.3% to 0.2%. Without Ireland, the eurozone growth rate came in at a decent 0.2% but has now dropped for three consecutive quarters. Can the eurozone defy gravity for much longer?
With energy prices still rising steadily, including gas prices, the winter months will see an additional growth challenge. On top of that, interest rates are now higher and businesses indicate less appetite for borrowing as a consequence, according to the ECB bank lending survey. The eurozone economy has continued to experience decent growth for now, but these factors will still weigh on growth.
Taking the Irish volatility out of the mix, a modest growth rate is what can be expected in the months ahead. GDP Eurozone Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
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