Second reading confirms eurozone Q3 growth at 0.4%, with mixed performance across economies

• The second estimate for eurozone Q3 GDP was +0.4% quarter-on-quarter, matching the preliminary reading.
• Growth in the prior quarter had been 0.6%.
• The second estimate also confirmed a 1.3% year-on-year increase, consistent with the preliminary figure.
• The previous quarter's annual rate was 1.2%.

The euro area economy held steady in the third quarter, with no revisions to the initial data. Ahead of the first release, analysts had forecast a quarterly expansion of only 0.2%. The second estimate therefore confirmed the upside surprise seen two weeks earlier.

However, as noted at the time, the apparent resilience comes with a caveat.

Ireland posted standout growth, with a quarterly expansion of 5.5% in Q3. But Ireland's GDP figures have been notoriously volatile over the past year, warranting caution. The expansion was mainly fueled by strong activity in multinational-dominated sectors, particularly information and communication, as well as manufacturing.

Ireland's headline growth figure often provides a distorted gauge of domestic economic health. This is because it is heavily swayed by contract manufacturing and global profits of multinationals, which largely revert to foreign shareholders rather than boosting local living standards.

Among the larger economies, the picture was less positive. Germany recorded a modest 0.2% expansion, Italy stagnated at 0.0%, and France saw a contraction of 0.1%. That hardly suggests broad-based resilience across the eurozone's largest economies.

As with the initial report, the latest inflation data from France and Spain are unlikely to deter the ECB from raising rates again next month. For the moment, the euro area economy is still holding up, but the growth picture remains patchy. The key question is whether the broader economy can maintain its resilience in Q4 and into the new year. If not, the ECB may confront a difficult combination of slowing growth and elevated inflation.