The second release of Q3 Eurozone GDP growth confirmed the higher-than-expected slowdown to +0.2% q/q, half the pace seen in H1. Details by component will be published on 7 December, but we expect the car certification delays (due to a new emission test procedure) to be the main driver for the slowdown. Fixed investment is expected to have continued to expand driven by solid consumer demand and accommodative credit conditions. Consumer confidence softened in Q3 as inflation accelerated (2.1% on average vs 1.7% in Q2) on the back of higher oil prices while employment growth slowed down to +0.2% q/q (+0.4% in Q2). Net exports should have contributed negatively to growth on the back of weaker export expansion and strong imports. We expect GDP growth to accelerate to +0.5% q/q in Q4 as the negative effects from the car sector will start to fade, bringing annual growth to +1.9%. Going forward, we expect GDP growth to remain above potential at +1.7% in 2019 (-0.1pp revision compared to our previous forecast). Slowing global growth momentum and elevated political uncertainty (Italy, Brexit, EU elections) remain drags on the Eurozone. The ECB is expected to gradually normalize monetary policy with a first rate hike in Q4 2019 after the end of QE this December.
