Will the ECB's Stimulus Boost Economic Growth in 4Q15?
Eurozone’s GDP grew by 0.3%
According to Eurostat, Eurozone’s GDP (gross domestic product) rose by 0.3% in the second estimate for fiscal 3Q15—compared to 0.4% in fiscal 2Q15. On a YoY (year-over-year) basis, the GDP grew by 1.6% in the Eurozone.
With the GDP staying lower, the iShares MSCI Eurozone (EZU) fell by 1.5% as of December 8. Companies like Royal Dutch Shell (RDS.A), Sanofi (SNY), Vodafone Group (VOD), and GlaxoSmithKline (GSK) fell by 1.1%, 1.4%, 2.0%, and 1.3%, respectively, as of December 8.
Household final consumption expenditure
During the September quarter, the household final consumption expenditure contributed positively towards the GDP growth. It rose by 0.4% in the Eurozone. The gross fixed capital formation remained stable in the Eurozone. Also, inventories made a positive contribution towards the GDP growth.
External balance
During the September quarter, the imports rose more than the exports. While the imports rose by 0.9% in the Eurozone, the exports grew by 0.2%. As a result, the external balance contributed negatively towards the GDP growth.
ECB cut the interest rate on the deposit facility to -0.30%
To boost economic growth in the Eurozone, the ECB’s (European Central Bank) governing council decided to extend its monthly asset buys by six months. It decided that the interest rate on the deposit facility will be decreased by 0.10% to -0.30% starting on December 9, 2015. The interest rate on the main refinancing operations and the interest rate on the marginal lending facility will remain unchanged at 0.05% and 0.30%, respectively.
With all of the stimulus package in the past, the Eurozone failed to instate growth in the economy. The global slowdown and falling demand kept the inflationary pressure lower in the economy. Will the extended stimulus help the Eurozone improve the business climate and lift consumer sentiment needs in the coming days?
To learn more, read The ECB Cut Interest Rates to Lift Inflation in the Eurozone.
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