Euro-area economy cools, Italy stagnates

FRANKFURT • The euro-area economy unexpectedly grew at its weakest in more than four years and a measure of confidence hinted at a more protracted slowdown.

GDP increased 0.2% in the third quarter (3Q), half the pace of the previous three months and the rate that was forecast. Growth in two of the bloc’s four largest economies — Germany and Italy — ground to a halt, while sentiment among consumers and businesses in the region fell in October to the lowest in 17 months.

The slowdown comes at a crucial point in time for the European Central Bank as it prepares to cap asset purchases this year. President Mario Draghi acknowledged last week that the euro-area lost some momentum, but insisted it isn’t headed for a downturn.

After a stellar 2017, this year’s weaker performance is largely a consequence of slower exports, which have suffered from protectionist policies, while domestic demand has held up well. Consumer confidence picked up in October, in a sign that one engine of growth will continue to hum in the months ahead.

Temporary factors may have had some part to play in the 3Q underperformance. German output was damped by carmakers’ failure to adapt to new emissions tests and a slowdown in construction, and the Bundesbank has said the growth break “shouldn’t be long-lasting”.

Kuka AG cut its revenue forecast on Monday, citing a slowdown in the automotive industry as well as uncertainty in China. Italy’s economy also stalled in the 3Q on weakness in the industrial sector. — Bloomberg