MacroEconomic Bulletin - Second half of September 2023


Finally, and in line with expectations, the #Fed paused rate hikes, leaving them at around 5.25% and 5.5%. This decision aligns with their strategy of closely monitoring economic data to maintain an appropriate range for interest rates. However, the Fed's Dot Plot suggests the possibility of one more hike later in the year that would leave rates between 5.5% and 5.7%. This decision is not unanimous and may change depending on the evolution of macroeconomic indicators. In addition, we highlight Powell's allusion to the possibility of starting to lower rates as early as 2024, with the market placing it as early as July. On the other hand, the central bank has revised its growth forecasts, which point to greater dynamism in the US economy, but with inflation levels that will remain high, not reaching the 2% target until 2026.

As for the #Eurozone, Eurostat flash estimates reflect an improvement in #inflation from last month. Inflation is expected to fall to +4.3% in September 2023 (previously +5.3%), the lowest level since October 2021. This decline is determined by the drop in certain countries such as Germany, Belgium or the Netherlands, which have offset the rebound in Spain or Italy. Nevertheless, core inflation is expected to remain at +5.5%, proving that the inflationary spiral is far from being behind us. Not to forget that, despite the large drop this September, inflation remains high and justifies the interest rate increase that occurred at the ECB's last meeting a few weeks ago. In addition, the ECB cautions that its intention is to continue with high rates for several months to bring prices closer to the monetary authority's target.

At a #globallevel, the #OECD has revised  its growth projections, offering a more promising global outlook for 2023 due to the improved performance of the United States. However, their outlook for 2024 leans towards pessimism, as they anticipate a deceleration in China's growth and challenging financial conditions weighing down on global economic expansion. Consequently, the agency predicts a +3.0% growth rate for the world economy in 2023, a slight slowdown compared to the +3.3% recorded in 2022 (even after considering the June estimate of +2.7%). This deceleration is expected to persist in 2024, with a projection of +2.7% growth, down from the initial June estimate of +2.9%. At the national level, #Germany's growth forecast has been downgraded, with expectations of a -0.2% growth rate in 2023, indicating a recession, in contrast to the initial forecast of 0%. On the other hand, #India stands out with growth rates of +6.3% in 2023 and +6.0% in 2024, positioning it as a key driver of growth among OECD member countries.

Focusing on some of the euro zone major economies:

#Spain:  Following the calendar, the INE revises the GDP historical series, outlining a more dynamic recovery pace than initially advanced. Thus, GDP increased by +6.4% in 2021 and +5.8% in 2022, placing the recovery of the COVID-19 shock in the third quarter of 2022.  Also, favored by the traction effect, there has been a revision of the first 2 quarters of the year (to +0.6% and +0.5% respectively), resulting in a more favorable first half of the year which will counterbalance the slowdown already observed in some indicators for the second half of the year. On the other hand, #inflation again pointed to a rebound in prices, with an advance variation of +3.6% in September (+2.6% in August). This rebound is again due to pressure from energy and fuel prices, while core inflation, although still high, maintains its downward trend to +5.8% (+6.1%). Thus, the rebound in inflation at present is due to the more volatile components that for the time being is not being reflected in core inflation.

#France: #Inflation stagnates in the month of September, the year-on-year rate is expected to remain at +4.9%, according to the INSEE. The slowdown in the prices of food (+11.2% vs. +9.6%), should indeed be compensated by the acceleration in energy prices (+6.8% vs. +11.5%), due to the rebound in petroleum products. Moreover, the #businessclimate remains stable in September for the fifth consecutive month, although it has been on a declining trend since February 2022. Result of mixed movements in different sectors, with an improvement this month in the business situation in the manufacturing industry, offset by a decline in retail trade. However, #employment sentiment has rebounded compared to last month, driven by improved workforce expectations in the services sector.

#Germany: #Inflation brings positive changes in September, where the year-on-year rate in Germany is expected to be +4.5% (+6.1% in August), below the expected 4.6% and the lowest level since February 2022. Likewise, core inflation is expected to be +4.6% (+5.5% in August). On the other hand, Germany's #businessconfidence, according to the IFO, continued to fall in September, where companies are less satisfied with their current situation, albeit they are becoming less pessimistic about the next months. Both the services and manufacturing sectors are barely advancing. And finally, #Consumerconfidence is also expected to fall again in October, as persistently high inflation encourages people to save and is not expected to recover until the end of the year.