MacroEconomic Bulletin - March 2023



Improved growth prospects for the European Union and the euro zone, according to the European Commission. After avoiding recession during the last quarter of 2022 -annual growth in the European Union and Eurozone is estimated to be around +3.5% in 2022-, together with a resilient labor market and easing prices in the energy markets, the European Commission has improved the growth outlook for this year. In addition, the confidence of the different economic agents and other forward-looking indicators such as the PMI point to an improvement in the outlook for the first quarter of 2023, enabling the possibility of avoiding recession. Thus, the Commission estimates a growth of +0.8% for the EU and +0.9% for the euro zone (+0.3% for both previously) and maintains those for 2024 at +1.6% and +1.5% respectively. Among its main economies, Italy is expected to grow at around +0.8% and Germany will manage to avoid the previously estimated drop of -0.6% to hold on with a modest but positive growth of +0.2%.

Preliminary PMIs report a relatively more favorable outlook in February. The euro zone composite PMI for February improved markedly to 52.3 points (50.3 points in January), explained by an easing in supply chains and inflationary pressures as well as a strengthening of business confidence. Thus, the improvement was mainly driven by the services sector, but the manufacturing sector returned to the expansion zone for the first time since May. Furthermore, both Germany and France also reentered to the expansion zone with 51.1 and 51.6 points respectively. In addition, we highlight the significant improvement of the US composite PMI to 50.2 points (46.8 previously), after three consecutive months in the contraction zone, responding as well to a more favorable outlook.

Inflation maintains a downward trend in both the euro zone and the United States. Euro zone inflation decreased in January to +8.6% yoy (+9.2% in December), although energy recorded a positive month-on-month change, this was offset by the base effect of the sharp rise experienced in January 2022. However, core inflation held up, remaining at around +7.1% year-on-year. The United States, on the other hand, registered a lighter decline to +6.4% (+6.5% previously), but core inflation also declined to +5.6% yoy (+5.7% previously), meanwhile the labor market is resilient, with unemployment claims continuing to decline during February.


Ethifinance Ratings affirms Spain’s credit rating at A- with an outlook change from Under-observation to Stable, based on a more favorable year-end than initially expected, with an improvement in energy market conditions and inflation beginning to ease, factors identified as key in our previous report in September 2022. Moreover, the stronger progress of the Spanish economy during 2022 has translated into an improvement in the fiscal and debt situation, which, although still at high levels, would have closed 2022 with a debt-to-GDP ratio of 113.1% according to the Bank of Spain, below the 115.2% forecast in the Stability Plan.

Nevertheless, we maintain our growth forecast for 2023 at +1.1% as we begin to observe a weakening in investment and consumption that could point to an economy that is starting to yield in the face of rising prices and tighter financing conditions. All in all, in addition to the favorable factors discussed above, the labor market remains stronger than before the pandemic, tourism is recovering, and NGEU fund execution is starting to gain traction. All of which will sustain growth in 2023, improving in 2024 to +2.0%, responding to a more favorable inflationary and interest rate scenario. Additionally, the European Commission has upgraded the growth outlook for the Spanish economy to +1.4% in 2023 (+1.0% previously) and +2.0% in 2024. However, we highlight the high uncertainty surrounding this scenario, which is highly linked to the evolution of the geopolitical situation and inflation.

Nevertheless, inflation increased again in February to +6.1% yoy (Flash estimate), up from +5.9% in January. This increase is due to food prices continuing to exert pressure and electricity interrupting its downward influence by presenting a higher increase than in February 2022. However, as of next month, we should expect an interruption in the upward trend of inflation as the base effect of the price increase due to the outbreak of the war begins to appear. Moreover, despite the VAT rebate on food, core inflation continues to rise, increasing to +7.7% yoy (+7.5% in January). Despite the slight rebound in January inflation, industrial prices maintained their marked downward trend, registering a variation of +8.2% yoy (+14.9% in December). Downwardly influenced by the moderation of energy and intermediate goods, with the price of some chemicals, fertilizers and animal feed beginning to ease compared to the increase of the previous year, thereby starting to soften the cost pressure on agricultors and livestock farmers.


INSEE has confirmed growth during 4Q2022 at +0.1% qoq, firming 2022 annual growth at +2.6%, following +6.8% in 2021. Nevertheless, we observed certain signs of weakening in consumption and investment, presenting a contraction in consumption (-1.2% qoq vs. +0.4% in 3Q2022), and a slowdown in investment (+0.3% vs. +2.3%). Likewise, imports also cooled (-0.4% vs. +4.2%), favored by lower energy imports, while exports maintained a positive contribution (+0.5% vs. +1.0%). Likewise, the European Commission expects the slowing trend to continue during the first half of 2023, amid higher prices, tighter financial conditions and high uncertainty, so annual growth is expected to slow to +0.6%. Next year, growth is expected to improve to +1.4% due to a more favorable inflation scenario and financing conditions.

Furthermore, consumer confidence in February remains stable at around 80 points, albeit still significantly below the long-term average of 100 points. Also, while the outlook for the financial situation of consumers is improving, indicators relating to the propensity to consume are worsening, so that a tendency for consumption to slow down is expected in the first quarter of 2023. On the supply side, the outlook continues to improve and above the long-term average, increasing slightly to 103 points. This improvement has been similar in all sectors of activity, except for construction, which worsens slightly, although remaining in optimistic territory (112 points).

On the other hand, inflation increased again in February to +6.2% yoy (+6.0% in January: Flash estimate), derived from the strong rise in food and services, while energy continues to decrease its contribution and manufacturing products remained stable with respect to the previous month. However, we expect this uptick in inflation to reverse in the coming months, as the statistical effect of the outbreak of the war begins to be noticeable, in addition to other price indicators maintaining a downward trend, such as the Industrial Price Index, which declined again to +14.9% in January (+17.5% previously).


The Portuguese INE has revised upwards GDP growth in the fourth quarter of 2022, to +0.3% qoq (+0.2% previously) and +3.2% yoy (+3.1%). While maintaining positive contributions, we highlight the drop in the growth contribution of domestic demand (from 3.2 p.p to 1.9), explained by lower consumption and investment. Similarly, the contribution of external demand also declined (from 1.6 p.p. to 1.3), responding to a lower dynamism of exports, while imports remained unchanged. Thus, Portugal recorded a growth of +6.7% in 2022, surpassing pre-pandemic GDP levels. However, the European Commission estimates a slowdown in growth for 2023 to +1.0%, improving again in 2024 to +1.8%.

In addition, indicators of expectations continued to strengthen in February. In this sense, consumer confidence maintained the trend of improvement initiated last December, albeit remaining below the pessimistic level. On the supply side, it followed a similar trend, with a general improvement in all sectors except construction, although it should be noted that while the rest of the sectors remain in the optimistic zone, the manufacturing sector, despite presenting an improving trend, still falls below the pessimistic zone.

On the other hand, inflation maintained its downward trend in February, decreasing to +8.2% yoy (+8.4% in January; Flash estimate), mainly due to the normalization in the energy markets. However, food prices continue to exert inflationary pressures, core inflation increased slightly to +7.2% (+7.1% in January). Likewise, other price indicators point to a similar trend, with Industrial Production Prices decelerating again in January to +9.9% yoy, after reaching 25.5% in June 2022.