Eurozone economic sentiment deteriorated in October according to data released by the European Commission on Wednesday; the same gloomy numbers are likely to be confirmed by Eurostat on Thursday.
The decline is driven by manufacturing. Sentiment in services was positive in September and October but remains at its lowest level since June 2015. Services account for two-thirds of the Eurozone economy.
As the Eurozone economy is slowing, the export-dependent German economy is under greater pressure while French €10bn government stimulus is helping push the economy forward. German economic sentiment fell for the second straight month and to its lowest level in more than six years.
For nearly a decade, German growth has been heavily reliant on Chinese and US growth. The German economy is expected to grow by less than 0,5% in 2019, down from 2,1% in 2018.
French economic sentiment remains above the eurozone average, bolstered by the promise of a €10bn tax cut for 2019. France saw national output rise by 0.3% in the third quarter while the German economy shrank by 0,1% in the second quarter.
The incoming President of the European Central Bank, Christine Lagarde, has echoed her predecessor Mario Draghi in calling for an expansive budgetary policy by the Netherlands and Germany.
“… Why not use that budget surplus and invest in infrastructure? … Why not invest in education, why not invest in innovation, to allow for a better re-balancing?” Lagarde told France’s RTL broadcaster on Wednesday.
Unemployment continues to be much lower in Germany than in France. Unemployment reached 3,1% in August in Germany and 8,5% in France. For both countries, this is a record-low.