The Eurozone's GDP grew by 0.2% quarter-on-quarter in the third quarter, exceeding expectations, with France's growth rate reaching its highest in nearly three years, while Germany continues to stagnate

The Eurozone's GDP in the third quarter exceeded market expectations, but the performance among member countries has become increasingly divergent: France's growth rate reached its highest in nearly three years, while Germany's economy stagnated.

According to preliminary data released by Eurostat on Thursday, the Eurozone's GDP grew by 0.2% quarter-on-quarter in the third quarter, surpassing economists' expectations of 0.1% and also better than the 0.1% growth in the second quarter.

Earlier on Thursday, the French National Institute of Statistics and Economic Studies (Insee) announced that France, the Eurozone's second-largest economy, saw its GDP grow by 0.5% quarter-on-quarter in the third quarter, marking the fastest growth rate since 2023, despite the recent political turmoil in the country, this performance still exceeded expectations. In contrast, both Germany and Italy did not achieve growth in the third quarter, with Germany's GDP remaining flat quarter-on-quarter, avoiding a technical recession, but it has been in a state of low growth, zero growth, or economic contraction for 14 consecutive quarters.

Following the data release, the euro fell slightly against the dollar, down 0.43% for the day. Market focus has now shifted to the European Central Bank's policy meeting later on Thursday, where it is widely expected to keep interest rates unchanged at 2% for the third consecutive time.

Severe Divergence in Member States' Performance

Among the countries that have released data, Portugal emerged as the best-performing economy in the Eurozone, with a quarter-on-quarter GDP growth of 0.8%, supported by strong domestic demand and tourism.

In the broader European Union, Sweden led with a growth rate of 1.1%, followed closely by the Czech Republic with a growth of 0.7%. Lithuania experienced a contraction of 0.2%, while both Ireland and Finland saw declines of 0.1%.

The Eurozone's year-on-year GDP growth rate slowed from 1.5% to 1.3% in the third quarter, but still slightly above economists' forecast of 1.2%. The overall performance of the EU was slightly better, with a quarter-on-quarter growth of 0.3% and a year-on-year growth of 1.5%.

Joe Nellis, an economics professor at Cranfield University and MHA economic advisor, stated: "The Eurozone economy continues to move forward slowly, rather than falling into contraction."

He pointed out that there was a preliminary improvement in consumer demand in the third quarter, with easing inflation and slight wage increases providing some relief for households. The service sector remained stable, but manufacturing and exports continued to perform poorly, weighed down by weak global demand and ongoing cost pressures.

Continued Economic Slump in Germany

Germany's economy stagnated in the third quarter, following a contraction of 0.2% in the second quarter, with declining exports being the main reason, exacerbated by the U.S. increasing trade tariffs.

Deutsche Bank economist Robin Winkler stated that Germany's outlook for the fourth quarter is "better," as Chancellor Friedrich Merz's plans to increase defense and infrastructure spending through debt financing are being implemented. The new tax incentives for businesses implemented since July "seem to be having preliminary effects."

Nellis noted that the two largest economies in the Eurozone "continue to vie for the disreputable title of 'the sick man of Europe'", with the ongoing poor performance of Germany and France being a major drag on the entire region