Eurozone 3Q GDP Will Largely Exceed Expectations

On Friday, Eurostat will release the first estimate of Eurozone 3Q GDP. According to Bloomberg, the consensus expects a print of 9.6% QoQ (vs -11.8% prior). Regional surveys and latest Lagarde comments confirmed that the consensus looks pessimistic and that Eurozone 3Q GDP will largely beat expectations.

1/ French, German, Italian and Spanish reports showed that GDP rebounded significantly in 3Q, beating expectations:

#FRANCE Q3 PRELIMINARY GDP Q/Q: 18.2%❗ V 15.0%E; Y/Y: -4.3% V -7.3%E
*Link: https://t.co/i7ZuzNyJzF pic.twitter.com/giZy2axosv

— Christophe Barraud (@C_Barraud) October 30, 2020

#GERMANY Q3 PRELIMINARY GDP Q/Q: 8.2% V 7.3%E; Y/Y: -4.3% V -5.5%E

#ITALY Q3 PRELIMINARY GDP Q/Q: 16.1% V 11.1%E; Y/Y: -4.7% V -8.4%E

— Christophe Barraud (@C_Barraud) October 30, 2020

#SPAIN Q3 PRELIMINARY GDP Q/Q: 16.7% V 13.5%E; Y/Y: -8.7% V -11.8%E
*Link: https://t.co/49a40HJH8P pic.twitter.com/1oAOu4jL0J

— Christophe Barraud (@C_Barraud) October 30, 2020

2/ Austrian and Belgian reports also pointed to a sharp rebound:

#Austria Q3 Preliminary GDP Q/Q: +11.1% v -12.1% prior; Y/Y: -5.3% v -14.5% prior
*Link: https://t.co/k2nDf4Wbzj pic.twitter.com/JoYW0ROBfs

— Christophe Barraud (@C_Barraud) October 30, 2020

#Belgium Q3 Preliminary GDP Q/Q: 10.7% v -11.8% prior; Y/Y: -5.2% v -13.9% prior
*Link: https://t.co/IHnLL1VT9d pic.twitter.com/6JugEOIdRb

— Christophe Barraud (@C_Barraud) October 30, 2020

3/ During the ECB press conference, Christine Lagarde highlighted that 3Q GDP figure “might surprise on the upside“.

All in all, it looks pretty clear that 3Q GDP will largely exceed expectations with my proxies now pointing to a figure that will easily beat the highest forecast in the consensus (+11.5% QoQ). However, as I already flagged, the dynamic will change dramatically in 4Q with another contraction.

*#ECB LAGARDE: DON’T KNOW YET IF ECONOMY WILL SHRINK IN 4Q – BBG

➡ In my opinion, there is no doubt that:

*Bloomberg consensus is too optimistic
*4Q GDP will contract pic.twitter.com/30BVgxyD7e

— Christophe Barraud (@C_Barraud) October 29, 2020