MacroEconomic Bulletin - Second half of October 2023

#China: the 3Q GDP growth surprised on the upside (+1.3% vs +0.5%). Thanks to it, the achievement of the annual growth target of +5% now seems more likely. By components, the rebound in industry and consumption, driven by the measures taken by the government in response to signs of a slowdown, stands out. However, China still faces significant risks, including a real estate crisis, high youth unemployment, low consumer confidence and rising geopolitical tensions.

#Eurozone: as we expected, the third quarter has shown a slight #contraction of the economy (-0.1% qoq  vs +0.2% qoq of Q2). #Inflation remained in a downward trend and closed October at +2.9% -the best figure of the last two years- thanks to the behaviour shown by its main components: food, alcohol and tobacco (+7.5% vs. +8.8% in September) and energy prices (-11.1% vs. -4.6% in September).

On the other hand, #the US economy remains resilient and continues its soft-landing trend.  In the third quarter GDP grew by 1.2% (annualised rate of 4.9%), the fastest pace since the fourth quarter of 2021 due to the good performance of consumption (accounting for two-thirds of US GDP), together with expansionary fiscal policy and moderating inflation. However, the continued fall in the savings rate together with the tightening of financial conditions could lead to a moderation in this rate of growth towards the end of the year.

#Interest rates: no surprises. Both the ECB and the Fed have maintained interest rates at their respective meetings, although they do not discard any additional hikes, in our view this possibility is increasingly remote. Moreover, we do not expect a rate cut in the next six months.

#ESG: Eurostat has published the first edition of the report "Key Figures in European Living Conditions", a special issue dedicated to the situation of the Member States in terms of poverty, inequality, health, among others.  From this report we highlight that, although it presents an equitable distribution on average, the disparity between countries is evident. The AROPE rate, which measures the risk of poverty or social exclusion, varies significantly, from 34.4% in Romania to 11.8% in the Czech Republic, with the EU average standing at 21.6%. These disparities become even more concerning when analyzed from an intergenerational perspective, where 11 Member States, including Spain and France, exhibit higher child poverty than that of citizens over the age of 65. The pandemic and the cost of living crisis have had an impact, and although in 2022 there was no significant increase in poverty, there is concern about a possible change in the coming years due to the rising cost of living and economic weakness, reflected in citizens' perception of their ability to make ends meet, showing a pessimistic trend compared to previous years.

Focusing on some of the major eurozone economies…

#Spain:  the economy -in line with our forecasts- held up well in the third quarter.  #GDP grew at +0.3% qoq in this period (+0.4% previously) thanks to household consumption. However investment and external demand showed a contraction. Labour market remains strong, according to 3Q #EPA data (employment rate reached 70% for the first time). However, the unemployment rate grew to 11.8% (11.6% previously). Finally, flash #inflation data for October remained at +3.5% yoy. Core inflation kept the decrease path, closing the month at +5.2% (+5.8% previously).

#France: In Q3 2023, #GDPgrowth slowed to +0.1% qoq, after +0.6% in the previous quarter. Final domestic demand accelerated and contributed positively to GDP growth, however, foreign trade contributed negatively (-0.3 points after -0.1 points), as a result of exports falling sharply after a positive second quarter (-1.4% after +2.4%). #Inflation flash data improved by almost a percentage point to +4.0% yoy (previously +4.9%). This slowdown should be due to lower energy (+5.2% vs +11.9%) and food prices (+7.7% vs +9.7%).

#Germany: a decline in Germany's #GDP was recorded in the third quarter of 2023 (-0,1% qoq) after stagnating in the first quarter (0.0%) and growing in the second quarter (+0.1%). On the other hand, better flash #inflation data has been recorded in October (+3.8% vs +4.5%), the lowest figure since April 2021. Core inflation closed at +4.3%. The main drivers are energy prices and food prices.