Euro area economy grows strongly in Q3, likely to expand 0.6 pct sequentially in Q4

The final release of euro area’s third quarter GDP growth showed few surprises. The economic growth confirmed at 0.6 percent quarter-on-quarter, consistent with the average of the earlier four quarters. However, modest changes to the recent quarters’ figures led to an upwardly revision of 0.1 percentage points to the annual rate to 2.6 percent year-on-year,  the most solid rate since the first quarter of 2011.

The breakdown of expenditure affirmed that growth could hardly be more widespread, with every component making a positive contribution. And while private consumption growth eased to 0.3 percent sequentially, the slowest in a year, fixed investment rose over 1 percent sequentially for the second straight quarter, and government spending, net trade and inventories also each made a modest contribution to  the headline growth, noted Daiwa Capital Markets in a research report.

“Looking ahead, with business and consumer confidence highly elevated, we expect final domestic demand to remain the principal driver of growth, although strong recent readings for new export orders suggest that net trade will give a further boost in the current and next quarters”, added Daiwa Capital Markets Research.

But inventories are likely to be a slight drag in the near term after having added to the headline economic growth in the four of the last five quarters.

“Overall, we expect GDP again to grow in Q417 by 0.6 percent Q/Q - somewhat less than implied by recent economic surveys - and to moderate slightly to a more sustainable trend rate around 0.4 percent Q/Q throughout 2018”, stated Daiwa Capital Markets Research.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 31.2291, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 111.514. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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