Europe’s economy shows signs of cooling as third-quarter GDP in the euro area fell by 0.1 percent. The decline stems from weaker performances across several member economies, with Germany slipping by 0.1 percent and Ireland dropping 1.8 percent. Austria fell 0.6 percent, the Netherlands by 0.2 percent, and Portugal by 0.2 percent. Finland saw a 0.9 percent decrease, while Estonia and Lithuania declined by 0.2 percent and 0.1 percent respectively. These figures come from updated releases by Eurostat, published on Tuesday, confirming expectations set on October 30 for the euro area.
The eurozone continues to contract in the third quarter, marking another period of decline since the height of the health crisis in 2020. Early forecasts from Eurostat suggested the economy entered a technical recession after two consecutive quarters of negative growth, a pattern observed in late 2022 and early 2023. A later review in July showed flat growth at 0.0 percent, sparing the euro area from a formal recession label at that time. The new data, however, place the region on the edge of a possible technical recession again as the third quarter closes with a modest negative result. The IMF’s latest projections anticipate growth of about 0.7 percent for the euro area in 2023 and around 1.2 percent for 2024. On the same day, the European Commission is expected to release fresh macroeconomic projections.
Among the euro area’s largest economies, Spain emerges as the standout with a 0.3 percent quarterly gain in the third quarter. France added about 0.1 percent, and Italy essentially held flat. Belgium posted a rise of roughly 0.5 percent. In contrast, broad stagnation persists across the European Union, with overall GDP flat at 0.0 percent for the quarter.
Compared with the same period a year earlier, both the euro area and the EU register a 0.1 percent annual growth rate, a stark contrast to the more robust 1.8 percent expansion observed in 2015. Spain again shows notable year‑over‑year strength in the third quarter, while Portugal and Belgium display year‑over‑year gains around 1.9 percent and 1.5 percent respectively. On the yearly comparison, Germany reports a 0.4 percent decline in GDP, Italy remains largely unchanged, and France posts a 0.7 percent increase.
Inflation remains elevated while energy costs climb
Inflation held steady around 3.5 percent in October, even as energy prices surged. Oil prices rose about 73.5 percent over the period, underscoring ongoing price pressures that affect households and businesses across Europe and beyond. The mix of modest output growth and persistent inflation continues to shape policy discussions and forecast revisions around the continent.
Outlook and resilience
Despite softer economic activity, employment trends tell a different story. The labor market in the euro area showed resilience in the third quarter, with employment rising by about 0.3 percent. The broader EU employment picture also improved, climbing roughly 0.2 percent after a modest 0.1 percent uptick in the second quarter. On a year‑over‑year basis, employment grew by approximately 1.4 percent in the euro area and 1.3 percent across the EU during the third quarter.