Eurozone 3Q GDP growth runs out of steam

According to advance estimates, the Eurozone economy expanded 0.3% (QoQ, sa) in 3Q15 slowing from 0.4% in 2Q. This translated to 1.6% YoY pace, in line with the expectations but slightly slower than consensus at 1.7%. Amongst the core economies, trends were varied. Germany, Spain and Italy lost momentum in 3Q from the quarter before, while France recovered. Compared to the year before, however, Spain still emerged as amongst the fastest in the region, up 3.4% YoY (vs 2Q's 3%). As expected, Greek output slumped in 2H on the back of the debt crisis and banks' shutdown. Output here slumped -0.4% in 3Q from average 0.8% in 1H. 

Data breakdown will be released on 8 Dec along with the second estimate. Hard data and surveys suggest a gradual upturn in domes- tic demand continued to pull the cart, while the external sector faces slowing global demand despite the boost from a weak euro. The European Commission's economic sentiment indicator edged back to four-year highs, while industrial confidence neared a six-quarter high. 

Inflation continues to ease on a combination of weak cost-push and demand conditions. High unemployment rates and tepid wage growth however point to slack in the economy, keeping a lid on price pressures. Industrial production declined 0.3% QoQ in Sep, setting 3Q to near flat growth. Investment spending trends are looking up, but sluggish capacity utilisation and weak credit growth suggest underlying momentum remains tentative. 

On policy, this marginally softer growth pace in 3Q is likely to reinforce expectations of further monetary easing in Dec. The European Central Bank chief recently expressed concern over downside risks to growth from slowing global growth and trade, alongside weak inflation dynamics. Indications are that municipal and regional debt might be added to the QE shopping list later this year. Against this backdrop, if inflation prints surprise to the downside in the run-up to Dec's rate review, odds of further easing will rise here on