Eurozone economy shows resilience! Q3 GDP grows 0.4% quarter-on-quarter, far exceeding expectations; the "two locomotives" diverge in performance.

Title context: Eurozone economy shows resilience! Q3 GDP grows 0.4% quarter-on-quarter, far exceeding expectations; the "two locomotives" diverge in performance. Text: Although France, the eurozone's second-largest economy, unexpectedly contracted and faced headwinds such as high inflation and a bond market selloff, the eurozone's economic growth rate still reached twice analysts' expectations. Data released by Eurostat on Friday showed that eurozone third-quarter gross domestic product (GDP) grew 0.4% quarter-on-quarter, while economists had expected growth of 0.2%. Eurozone Third-Quarter Economic Growth Exceeds Expectations Specifically, the economic performance of major member states was mixed. Germany and Spain posted growth, with third-quarter GDP rising 0.2% and 0.6% quarter-on-quarter, respectively (economists had expected 0.1% and 0.6%); Italy's third-quarter GDP was flat quarter-on-quarter, weaker than economists' expectation of 0.1% growth; France's third-quarter GDP fell 0.1% quarter-on-quarter, weaker than economists' expectation of 0.1% growth. The eurozone's overall economic performance in the third quarter underscored the economy's broader resilience. In the face of the inflation shock from the Middle East war and the heatwaves and drought that affected much of the summer, the European economy demonstrated a degree of resistance. But the European Central Bank has flagged downside risks to the economy. The ECB kept interest rates unchanged this week but may still raise rates for a third time in December. Meanwhile, although inflationary pressures have not yet spread beyond energy, ECB officials remain vigilant. Another set of data released by Italy and France offered them little comfortconsumer prices in the two countries rose 5.6% and 3.8% in October, respectively, both the fastest increases since 2023 and above market expectations; although Spain's October inflation rate edged down as expected, it remained at a high of 4.9%. Inflation in France, Italy and Spain Is Well Above the ECB's Target The performance of Europe's "two locomotives" diverged. Amid multiple headwinds including surging borrowing costs, violent protests and political and budgetary uncertainty, France's economy unexpectedly contracted in the third quarter. France was already the weakest major economy in the eurozone. In the first half, France only narrowly avoided recession amid weak domestic demand, falling investment and heatwaves that hit agriculture. France's near-term outlook is also hardly reassuring. The minority government led by French Prime Minister Sbastien Lecornu is once again heading into a parliamentary standoff over austerity measures. Meanwhile, France's social and political situation remains turbulent, with next year's presidential election approaching and the far-right currently leading in the polls. French Finance Minister Roland Lescure said in an interview on Friday: "In 2026, with an unprecedented convergence of external and internal shocks, the French economy will stall. The economy must be restarted. We need to restore confidence, and to do that, passing a budget is essential, because it will allow us to lower interest rates." Economist Jean Dalbard said: "The French economy enters the final quarter without growth momentum, and the risks to the economy are clearly skewed to the downside. France's economy unexpectedly contracted 0.1% in the third quarter, while the market had expected growth of 0.1%. Trade volatility explains why actual performance fell well short of expectations. More worrying is that investment has again fallen sharply, the third consecutive quarterly decline, and the impact of the recent tightening in financing conditions has not even had enough time to fully materialize." By contrast, Germany's economy showed resilience. Despite factors such as low Rhine water levels, Germany's third-quarter GDP still grew 0.2%. The government's large-scale increase in infrastructure and defense spending has brought optimism about growth. At the same time, Europe's cap on imports of Chinese hybrid vehicles may also benefit German automakers. German Chancellor Merz also plans further measures to boost growth through welfare reform and attracting private capital investment. Italy's third-quarter economic performance was also unsatisfactory. The Italian government expects GDP to grow 1% in 2026. That growth would help fund some of the tax cuts Prime Minister Meloni has promised ahead of next year's election. Meloni has also asked the EU for additional fiscal space of about EUR28 billion (about USD31.3 billion) for energy and defense spending. But if growth slows, it will become more difficult to deliver on other government fiscal commitments, including reducing the budget deficit to below 3% of GDP. Spain's growth was mainly driven by domestic demand and trade, showing notable resilience. The Bank of Spain cited private consumption, job creation and population growth as factors driving growth. The Bank of Spain expects the economy to grow 2.6% in 2026 and 2.2% in 2027, well above the eurozone's overall growth rate. Spain has largely shaken off the effects of political instability, including Prime Minister Snchez's inability to get the budget passed.