Germany Avoids Recession, but Weak Growth Weighs on Europe

The European economy faced a sluggish recovery in autumn, with Germany showing limited growth that negated the more robust progress in Southern Europe. The eurozone saw a 0.4% growth from July to September and a 0.9% increase year-over-year. This slow pace is outstripped by the U.S., which experienced an estimated 3% growth in the third quarter. Challenges like competitiveness loss and impacts from the Ukraine conflict have been cited as key hurdles, affecting especially the German industrial sector.

Germany narrowly avoided recession with a 0.2% growth following a decline earlier in the year. Volkswagen is contemplating significant cuts due to profitability challenges. Consumers across Europe have saved instead of spending amid high energy costs, stalling potential economic stimulation. In France, while growth was boosted temporarily by the Olympics, underlying economic weakness persists, with slowing investments and a potential fiscal crisis prompting planned tax hikes and spending cuts.

Meanwhile, Spain emerged as a leading growth driver in the third quarter, benefiting from tourism and immigration, while Portugal experienced a modest uptick. The continued challenges in France and Germany have overshadowed improvements in formerly lagging southern European economies.