GDP slows in Europe as the EUR/USD slides in sympathy

The European Union has released quarterly GDP figures for Q3 of 2023. The region experienced a marginal slowdown in this past quarter, but did manage to avoid an outright contraction as some were expecting.

In the third quarter of 2023, seasonally adjusted GDP decreased by 0.1% in the euro area and remained stable in the EU, compared with the previous quarter, according to an estimate published by Eurostat, the statistical office of the European Union.

While some of the smaller European nations had success stories – Poland and Estonia’s GDPs both grew by over 1% and Malta’s by a whopping 2.4% - the continent’s bigger economies almost unanimously experienced slowdowns, including Germany, France, Netherlands and Italy. The biggest losers, however, were undoubtedly Ireland with GDP down 19.% and Estonia, down 1.3%.

One step forward, one step back

This was a mirror opposite to the theme of the second quarter of 2023, in which GDP increased by 0.1% in both the euro area and the EU.

In both cases, the marginal inches forwards and back indicated the pressures the economy has been under as two wars rage on close by.

As the European Commission itself noted in its release of the figures today, this paints a rather stark contrast to the United States, which reported 1.3% growth of GDP in the same quarter.

The EUR/USD unsurprisingly slid as a result of the disappointing figures, dropping more than 200 basis points to around 1.0760 this morning as retail investors shorted the pair in favour of a stronger dollar.

Read more: Dollar General stock is so cheap after Q3 earnings

New year, new interest rate?

Will this mean greater interest rate cuts than previously expected in 2024? Some analysts are already calling for this outcome from the ECB, in an effort to jumpstart growth in the new year.  For now, we'll have to wait and see.

A silver lining

One piece of good news from the report: employment figures were up 2% in the Eurozone and household final consumption expenditure increased by 0.3% in the same time period. These figures seem to suggest that, at least, any fears of impending stagflation are for now unfounded.

The full figures can be seen here.