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News | Question of the Week, WC 8th October
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Question of the Week, WC 8th October

Q: What happened in the EZ auto sector in Q3?

A: Normally Eurozone economists don’t have to worry about EU regulation, at least not in the short run. The third quarter, however, was an exception to that rule. On September 1st, the EU’s new emission’s tests for cars came into effect, a shift which will carry a big footprint on the Q3 GDP numbers. On the upside, new car sales likely rose strongly over the quarter, thanks to discounts on existing inventory ahead of the new rules. Our first chart below shows that new sales increased sharply in July and August, before reversing in September. 

On the downside, production in the auto sector all but collapsed, especially in Germany. The early indicators from the German automotive federation point to plunge not seen since the financial crisis, taking a big chunk out of industrial production growth. Our second chart shows that the hit was substantial. In addition, inventories likely contracted too, assuming that the rise in car sales mainly were drawn from existing stock. 

In total, we think this volatility was a net drag on GDP growth in the Eurozone, in the range of 0.1-to-0.2 percentage points on the quarter-on-quarter rate, with Germany delivering the main hit. 

Claus Vistesen, Chief Eurozone Economist

Pantheon Macroeconomics

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Posted: 10th Oct 2018

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