Eurozone | Some improvement in growth and inflation figures, though risks persist

Eurozone growth stabilized in 3Q19 thanks to the resilience of domestic demand, while the deterioration of industrial production and exports has halted. Our MICA-BBVA model projects still low growth in 4Q19. Core inflation has stepped in November, but it is early to tell if it will be sustainable.

Key points

• Key points:
• Eurozone growth stabilized at 0.2% QoQ in 3Q19, slightly better than expected, underpinned by the resilience of domestic demand.
• Hard data up to September point to a halt in manufacturing and exports deterioration, while retail sales grow at a steady pace driven by still improving labour conditions.
• Weak momentum to extend into 4Q19. Our MICA-BBVA model projects Eurozone quarterly growth to remain broadly steady (0.1%-0.2% QoQ). We maintain our forecasts into 2020 at around 0.8%.
• Core inflation surprised on the upside to 1.5% in November driven by the strong increase in services prices, but sustainability has yet to be proved.
• Risks remained title to the downside. The probability of a hard Brexit of higher car tariffs seems to be declining in the very short term, but could arise again next year along with increasing political uncertainty.

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