Eurozone growth stable as inflation gets boost


November 1, 2016, 12:08 am TWN

〔The China Post〕BRUSSELS -- Economic growth in the eurozone remained low but stable in the third quarter as inflation rose to a 27-month high amid fears over Brexit and major elections in France and Germany.

The Eurostat statistics agency said growth in the eurozone remained stable in July to September, to 0.3 percent, which was on par with analysts surveyed by Factset, a data company.

Analysts said the expansion remained low, however, and came on the back of France that shook off a contraction earlier in the year to expand by 0.2 percent in third quarter.

The growth figure will feed worries that the European economy will fail to bring new jobs or significantly boost inflation.

"The upside for Eurozone growth continues to be constrained by a number of fundamental factors, including structural impediments in a number of countries (notably Italy and France) and significant banking sector problems," said IHS Global Insight's Howard Archer.

Archer said the perspective for next year remained a particular concern with key elections looming, as well as the launch of tricky negotiations between Britain and the EU after the British vote to leave the bloc.

"The UK's Brexit vote could impact on Eurozone activity in 2017 ... (as) its likely difficult exit negotiations with the European Union get underway and are in the foreground," Archer said.

The full 28 members of the European Union meanwhile showed growth of 0.4 percent in the third quarter, also on par with analyst predictions.

On a 12-month basis, growth in the eurozone stood at 1.6 percent.

Consumer prices in the eurozone, which dipped in and out of deflationary territory last year, rose a higher-than-expected 0.5 percent, the highest since June 2014.

A survey of analysts by Factset had forecast inflation of 0.4 percent for the period.

Inflation, though at its highest level in over two years, remains very far off the target level of near 2.0 percent set by the European Central Bank.

Analysts fretted that core inflation, which does not account for volatile energy prices, remained very low and indicated that consumers lacked confidence and were still reluctant to spend.

The ECB has embarked on an increasingly controversial monetary stimulus program to boost inflation and the economy, which has yet to deliver the intended results.

Earlier this month, European Central Bank president Mario Draghi rejected calls that the bank end now or scale back its massive bond purchases as well as its super low interest rate policy.

The ECB stimulus scheme, known as quantitative easing (QE), involves the purchase of public and private bonds at the rate of 80 billion euros per month, and is currently set to end in March 2017.

Critics, especially in powerful Germany, have scorned the policies, blaming them for some major problems at Europe's biggest banks.

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