Euro Zone GDP Grows 0.4% in Q3, Beating Forecasts as Investment and Consumption Hold Up

The euro zone economy grew 0.4% in the third quarter, surpassing economists' expectations of 0.2% in a Reuters poll, Eurostat data showed on Friday. Year-over-year growth reached 1.3%, above the 1.1% forecast and broadly in line with potential output. Growth slowed from an exceptionally strong 0.6% in the second quarter. Among major economies, Germany expanded 0.2% and Spain and the Netherlands each grew 0.6%, while Italy was flat and France contracted 0.1%. Ireland's exceptional 5.5% quarterly growth skewed the bloc's headline figure. Heavy spending on AI, defense and infrastructure boosted investment, while robust foreign demand and resilient household consumption supported output despite elevated energy costs. Most forecasters now expect expansion above 1% this year and acceleration in 2027. However, the ECB fears resilience may fade. Rising global borrowing costs and a renewed energy price surge — with natural gas at its highest since early 2022 — could force another rate hike as soon as December, dampening growth further.