Eurozone shrinks in third quarter, inflation draws breath.

The eurozone contracted in the third quarter of this year. This was a minimal 0.1% drop from the previous quarter, but reflects the difficulties facing economic activity amid rising interest rates, high prices and trade risks.

In preliminary data released by Eurostat on Tuesday, the German economy contracted by 0.1%, as did Lithuania, Portugal and Estonia (-0.2%), Austria (-0.6%) and Ireland (-1.8%), whose volatile GDP continues to decline. The contraction exceeded analysts' forecasts who expected the economy to stagnate, according to a Reuters poll.

In addition to problems in Germany, France slowed from 0.6% to 0.1% and Italy stalled, posting 0.0% growth, still better than' 's previous drop of 0.4%. Standing out in these statistics are Latvia, which posted a 0.6% increase, Belgium (0.5%) and Spain (0.3%), which had the largest year-on-year increase (1.8%). "Overall, service-oriented economies have proved more resilient," said Tomasz Dvorak of Oxford Economics.

Problems affecting economic activity: restriktivnaya monetary policy, credit contraction, lower demand... "The economy is likely to remain weak for the rest of the year," ECB President Christine Lagarde said recently. If the next quarter also brings contraction, the eurozone will be in recession, but lower inflation should help households regain purchasing power.

In July-September, prices' 'moderately declined from 5.3% p.a. to 4.3% as the months progressed. In October, the rate improved significantly to 2.9%, according to data also published by Eurostat. That was 1.4 points lower than in September and the lowest level since July 2021.

The highest inflation rates were recorded in Slovakia (7.8%), Croatia (6.7%) and Slovenia (6.6%). The lowest rates were recorded in Belgium (-1.7%) and the Netherlands (-1%), where deflation persists. Spain was in the middle with a value of 3.5%. Other major economies show similar' 'values. Inflation stands at 3% in Germany, 4.5% in France and 1.9% in Italy, where it fell nearly four points.

"The eurozone is contracting slightly amid higher interest rates, slowing external demand and the continuing impact of the energy price shock. However, the economy is still not falling into the abyss," noted Jamie Rush and Maeve Cousin of Bloomberg Economics. At the same time, "inflation is showing a brightening decline in overall rates and easing cost pressures in more general terms. This combination is likely more or less in line with what the ECB wants to see. The likelihood of another interest rate hike this year is now very low," they said.