Eurozone growth set to be best in decade

The eurozone’s annual economic growth rate outstripped that of the United States in the third quarter setting up 2017 as the best year for the currency area since financial markets crashed a decade ago.Germany was a major factor, but even some of the bloc’s laggards, such as Italy, showed signs of revival.Eurostat, the European Union statistics office, confirmed a preliminary estimate that eurozone gross domestic product (GDP) grew 0.6% from July to September from the previous quarter and on a year on year basis was 2.5% higher.This was higher than the 2.3% year-on-year rate for the US economy, which had been growing faster than the eurozone.The US quarterly numbers were slightly better than the eurozones at 0.7%, however.“A robust labour market recovery, growing export markets, an accommodative monetary stance, improving lending conditions and modest inflation are but a few of the tailwinds that the eurozone economy is experiencing,” ING economist Bert Colijn said.“Because of that, this could well be its strongest year for growth since 2007. The eurozone will likely outpace both the US and UK in terms of GDP growth in 2017,” he said. Eurozone GDP grew 3.0% in 2007, and reached 2.1% in 2010 and 2015.Partly as a result of the growth, eurozone investments have turned in one of their best years since the single currency was born in 1999, confounding many who had bet on the bloc to be the disaster play of 2017.The strong eurozone growth was powered by the biggest economy Germany, which shifted into an even higher gear in the third quarter, propelled by buoyant exports and rising company investments in equipment.Seasonally adjusted German GDP rose 0.8% on the quarter, beating a consensus forecast of 0.6%, which was also the second-quarter growth rate.Second biggest France grew 0.5% on the quarter and 2.2% in annual terms and the third biggest Italy beat expectations with a 0.5% quarterly, and 1.8% annual growth, supported by exports and domestic demand.The Netherlands, the fifth biggest economy, grew an expected 0.4% on the quarter after a record jump of 1.5% in the previous three months, putting it on track for a 3.3% expansion this year, the strongest since 2007.Outside the bloc, eurozone growth also exceeded that of Britain, the EU’s second-ranked economy which will leave the bloc in March 2019.The British economy, affected by a drop in the pound against the euro since last year’s Brexit vote, expanded 0.4% on the quarter in sterling terms and just 1.5% annually.Separately, Eurostat said eurozone industrial production fell by 0.6% month-on-month in September as expected by markets but rose 3.3% year-on-year, slightly beating economists’ average forecast of a 3.2% increase.“The outlook for production in the fourth quarter remains strong,” ING’s Colijn said. “New orders for manufacturing surged in August and businesses are reporting large backlogs of work according to the PMI survey.“That should result in continued strength in industry in the final quarter of the year, adding to the possibility that our estimate for GDP growth in 2017 of 2.3% could still be too low,” he said.The stronger growth supports the European Central Bank’s decision last month to start weaning the eurozone off ultra-loose money by saying that from January it will halve the amount of bonds it buys every month to €30bn ($35.1bn). It nevertheless promised years of stimulus and left the door open to backtracking.