GDP growth marginally weakened to +0.25% q/q in Q3 from +0.35% in Q2, but with evidence that an industrial recession is at play. Domestic demand growth was fairly stable (+0.5% in Q3, as in Q2), driven by corporate and public investment. The consumer landscape is showing winners and losers, with housing and durable goods among the best performers and food and energy among the worst ones. Overall, domestic demand is still driven by better income growth (a fiscal stimulus) and the environment of low interest rates that helps to finance long-term spending. However, net exports made a large negative contribution to growth (-0.4pp) showing that external demand is low, contributing to a rise in inventories (+0.15pp contribution to growth). As a result, the industrial recession is now official (manufacturing output decreased by -0.5% in Q2 and -0.4% in Q3). Advanced indicators suggest a weakening economy in Q4, but still driven by the same stabilizing forces (fiscal stimulus, construction) that should help to smooth full-year growth to +1.2% in both 2019 and 2020.
