Another strong quarter for eurozone GDP

Eurozone growth remains resilient despite the energy shock, but higher energy prices and tighter credit point to more modest expansion ahead.

• Quarterly GDP growth eased from 0.6% to 0.4% in the third quarter, still well above trend.
• The economy has accelerated since the Middle East war began at the end of February, while the inflation impact has so far been mild and real wage growth remains positive.
• Industry is being hurt by higher energy costs but is benefiting from the technology boom and increased defence and infrastructure spending.
• Ireland grew 5.5%, although multinational accounting activity makes that figure a poor guide to underlying conditions; excluding Ireland, eurozone growth was 0.2% and has fallen for three consecutive quarters.
• France contracted 0.1% in the third quarter, Italy stagnated, Spain and the Netherlands grew 0.6%, and Germany grew 0.2%, down from 0.3%.

Takeaway: The eurozone can sustain decent growth for now, but rising gas prices, the winter energy challenge and higher interest rates should weigh on activity, making modest growth the likely outcome once Irish volatility is excluded.