Euro area-111252676

1Raphael Brun-Aguerre (33-1) 8703 2409raphael.x.brun-aguerre@jpmorgan.comJ.P. Morgan Securities plcGreg Fuzesi (44-20) 7134-8310greg.x.fuzesi@jpmorgan.comEurope Economic Research01 November 2024J P M O R G A NAt the country level, Germany grew 0.7%q/q saar, but saw 2Q revised down 0.8%-pt to -1.2%q/q saar, and hence is broadly stagnating. France was firmer at 1.5%q/q saar, helped by the Olympics, while Italy stagnated (-0.1%q/q saar), which seems consistent with the weaker Italian PMI. Spain contin-ued to outperform, growing 3.4%q/q saar. This left the rest of the region, excluding Ireland, growing slightly above a 1%ar. Few other details are available at this stage, but it looks as if consumer spending strengthened in 3Q. Increases have been reported in France and Spain, although the former was helped by the Olympics. The German statistics office also pointed to an increase in consumer spending. On the other hand, it looks as if fiscal capital spending was weaker. This may however partly owe to a new European safety regulation for heavy and light vehicles. But, while capex may be going through a lull, the latest retail sales data are suggesting a more solid turn upwards. Much delayed German data are now available through September and show a strong 5%q/q saar gain in 3Q24. This likely to boost the Euro area report for September (Figure 2). This could reflect rising real incomes finally hav-ing a more noticeable impact on spending. The ongoing rota-tion between business and consumer confidence may also be consistent with the latest GDP data (Figure 3). 859095100105201020122014201620182020202220242015 = 100, last obs. is estimate for SeptemberFigure 2: Euro area retail salesSource: Eurostat, national sources, J.P. Morgan-6-5-4-3-2-101215161718192021222324Standard deviations from 2000-07 averageFigure 3: Euro area economic sentimentSource: European Commission, Markit, J.P. MorganBusiness sentimentConsumer confidenceEuro area unemployment hits record lowWhile business spending may have weakened, their is little impact on the labor market so far. This week’s data report that •US election a large source of uncertainty•Ahead of this, incoming Euro area data are showing some resilience; consumer may be finally stepping up•GDP surprised positively in 3Q, unemployment fell to a new record low and inflation has moderated...•...but, pressure points remain: the German labor mar-ket and, to a lesser extent, Italian growthAhead of next week’s US election, which is a large uncertain-ty for the Euro area economic outlook, this week’s data have been constructive. Euro area GDP growth increased more than expected in 3Q24, even controlling for Irish growth, unemployment fell to a new record low and the flash inflation report for October consolidated the recent slowing in underly-ing inflation. The German labor market report, however, vali-dated the job cuts signalled by the German composite PMI employment index and was a reminder that there are signifi-cant areas o