Figures show that the EU grew at a pace of 0.3% over the last quarter. This matched analyst expectations, and contrasts with the surprising surge in French growth. Private sector growth there managed to pull the country out of the stagnation it showed during the second quarter. The recent terrorist attacks and threats have had a significant impact on the growth in the service sector in France, with the tourism industry growing by about 1% only. It was expected to expand by more than 2%.
Across the border and into the biggest European economy, the German private sector slowed down during the month. Nevertheless, Germany’s private sector will keep on growing after posting better than expected growth figures during the second quarter. It seems that the locomotive that is driving the sluggish growth of the EU forward, will keep on doing so under the mantle of an aggressively expansionary ECB monetary policy.
The question that investors must ask themselves is whether this rate of growth is sustainable given the record market liquidity encouraged by the ECB’s monetary policy. It seems like even after the ECB pulled out its heavy guns in the form of negative rates and quantitative easing, the EU cannot seem to find a path towards robust growth. It seems that the EU is suffering from structural issues that are hiding behind the anemic growth, and despite unprecedented liquidity levels. Will France and Germany depend on this to keep on growing or will their private sectors choke under a sea of liquidity that is supposed to provide a boost?
