Eurozone: economy muddles through at 0.3% growth in Q3, ECB more likely to extend QE - ING

Bert Colijn, Senior Economist at ING affirms that with sluggish summer growth and weak core inflation at 0.8% in October, the European Central Bank looks more likely to extend purchase program in December.

Key Quotes: 

“GDP grew at a modest pace of 0.3% QoQ in Q3, just like it did in Q2. This was in line with expectations as Brexit and other political developments caused large economic uncertainty. While post-Brexit economic activity has not come to a halt in the Eurozone, somewhat of a wait-and-see attitude showed from economic surveys over the summer months with businesses and consumers.”

“The higher oil price did cause today’s released Eurozone inflation rate to increase again, from 0.4% in September to 0.5% in October. With the fading out of the negative energy price effect on the inflation rate, the headline number is climbing, but the core inflation rate has yet to move.”

“The increasing inflation rate and strong October surveys about the Eurozone economy indicate that the window of opportunity for extending QE – at current or maybe even slower pace - is closing, but the ECB will be less than satisfied with core inflation holding steady below 1%. We already liked the December meeting for the announcement of further action and if the current trend of higher inflation and improving economic indicators persists, it will become very difficult for the ECB to wait longer than that.”