Shoppers at a Paris market stall are paying for a war in the Persian Gulf. That's the picture the weekend Journal paints. The eurozone grew 0.4% in the third quarter, down from 0.6%. France's economy shrank. Across the Channel, seven in ten British finance chiefs expect energy costs to cut their profits. Across the Atlantic, Canada's economy turned out to have stalled, in the same week its central bank raised rates.
Start with Europe. The EU's statistics agency reported the 0.4% figure Friday. Ireland, which grew 5.5% thanks to the big multinationals booked there, flattered the total. Strip that out and the eurozone grew 0.2%, after 0.3% in each of the two quarters before. Germany grew 0.2% on infrastructure and defense spending. Spain kept expanding. France went backward, and that's the worry. Its public debt is close to 120% of GDP. Its deficit is expected to reach 5.4% of GDP in 2026, well above the EU's 3% ceiling. Its bond yields sit at multidecade highs. The ECB held rates Thursday. Oxford Economics expects eurozone inflation to come in at 4.3% next week, against a 2% target.
Three economies, one energy bill
Britain's version came from the Bank of England's own survey of 1,945 finance chiefs, taken Oct. 2 to 16. They expect to raise their prices 3.8% over the next year, a bit faster than the 3.7% they said in September. Wage growth is cooling, from 3.9% to an expected 3.4%. And 71% of them expect profit margins to fall because of energy prices. The Bank is expected to raise its rate to 4% from 3.75% at its next meeting.
Canada's economy was flat in August, a second straight flat month. Statistics Canada's early read has September down 0.1%. That puts third-quarter growth near 1.3% annualized, against the Bank of Canada's 2% forecast and 3.3% the quarter before. The bank had just raised rates for the first time in more than three years, citing energy prices. Manufacturing and oil and gas extraction fell. On Friday in Montreal, Canada and the EU also signed a set of partnership agreements. Canada sends two-thirds of its exports to the U.S. and wants to double its non-U.S. exports by 2035. Washington has objected. We'll report the trade dispute and leave the refereeing to others.
Our read
This is Investments and Risk, IN04. The pattern is the one our economy letter described Saturday for the U.S. Hot prices, slowing growth, central banks leaning toward hikes. Now it's showing up in Europe, Britain and Canada at once. The model books own Europe and the developed world through index funds. The Vanguard FTSE Europe fund (VGK) is in 11 books and the iShares EAFE fund (EFA) in 5, held at weight; nothing added. They're there for the dividends and the spread of risk, and one soft quarter doesn't change that case. France's debt is the line we'd watch.
Here's the check for your own plan this week. Pull up the fact sheet of your international fund, the one in your 401(k) labeled international or developed markets. Look at two lines. The country weights, and the share in France and Canada in particular. If it's a bond fund, look for French government debt. This isn't about selling. It's about knowing how much of your money is riding on Europe's energy bill. If that share surprises you, bring the fact sheet to your next review and we'll read it together. That's the umbrella check. You do it on a cloudy afternoon, not in the downpour.