MacroEconomic Bulletin- Second half of January 2024


In the #UnitedStates, #Q4GDPgrowth (first estimate) shows a slight slowdown, but the US economy is still strong. GDP growth was +3.3% year-on-year (+0.8% quarter-on-quarter), better than consensus expectations of around +2%. Savings and a strong labour market have helped growth. For 2023 as a whole it is estimated a growth rate of +2.5%, better than the +1.9% for 2022. As far as interest rates are concerned, no immediate changes are expected at the January meeting. Following the good economic performance, we don't expect any interest cut during the first half of the year.

The #Eurozone just managed to avoid a minor recession, with #Q4GDPgrowth of +0.1% per year instead of the predicted -0.1% contraction. This happened because Germany's economy shrank and France's remained unchanged, but Spain, Portugal and Italy had good numbers (+0.6%, +0.8% and 0.2% quarter on quarter). Although a recession was avoided in 2023, the +0.5% growth in the eurozone is a slowdown from 2022's +3.5%, suggesting a weaker economy due to higher prices and tighter financing. This year, we anticipate a slight improvement in growth, exceeding its potential (+1.2% according to the OECD). This will be supported by easing inflation, increased consumer spending, stable investment, and higher demand from abroad. However, there are still risks, such as possible price increases due to recent international conflicts and the slowdown in China, which is a key factor for global growth. As far as interest rates are concerned, the ECB decided at its 25th January's meeting to leave them unchanged. The same as in the  US, we don't think there will be a cut in the first half of the year.

#Spain: The Spanish economy has performed better than expected, growing faster in the last three months of the year. It grew by +0.6%, three times more than the +0.2% we and other experts had forecast. This is mainly because of private consumption. As a result, we think the economy grew by +2.5% for the year as a whole, which is a little more than our earlier forecast of +2.4%. As for prices, they rose a little in January to +3.4%. But the good news is that the underlying rate of inflation, which doesn't include things like food and energy prices, remained at +3.6%.

#France: Europe's second largest economy ends #GDPGrowthQ4 2023 with no growth at 0.0% (same as last quarter). This is mainly because of the worst behaviour of private consumption and investments. However, France has managed to avoid a recession. Growth for 2023 as a whole is only +0.9%, a big drop from the +2.5% growth in 2022. The fall in spending and investment and the decline in consumption show that the French economy is still struggling due to high interest rates. According to EthiFinance Ratings, we believe that the economy should start to recover thanks to an expected recovery of private consumption, as well as lower inflation and a small increase in purchasing power due to real wage growth.

#Germany: According to Destatis, #GDP fell by -0.3% in Q4 compared to Q3, the worst performance in the eurozone with Ireland. The German economy, which was flat in the first three quarters, declined in Q4 2023, but didn't fall into a technical recession. On the supply side, we highlight the -2% fall in manufacturing, excluding construction, and services. On the demand side, the -0.8% contraction in household spending and the -1.7% cut in government spending are noteworthy. For 2024, we expect economic growth of +0.3-0.5%. In 2023, prices will rise by +5.9% year-on-year compared to 2022, although it's less than the record high of 2022. At nearly +6%, it's still high, keeping financial conditions tight and not helping the German economy rebound early in 2024.

#Portugal: Portugal's economy performed really well in the last three months of the year, outperforming other countries that use the euro. In this period, Portugal's #Q4GDP grew by +0.8% compared to the previous quarter (which had fallen by -0.2% because manufacturing wasn't doing well), mainly because people were spending more. Looking at the year as a whole, Portugal's economy grew steadily in 2023, with growth of +2.3%. For 2024, we think the economy will continue to grow at a rate of around +1.3%. Among other things, we expect a rebound in public spending due to major planned projects, especially in the rail sector, including a link with Madrid, which will be financed by EU Next Gen funds. In terms of inflation, Portugal closed the year with a rate of +1.9%, down from +2.2% in the previous month.

#ESG: A draft report by the European Commission, mentioned by the Financial Times, points out that the EU will need to invest €1.5 trillion a year between 2031 and 2050 to achieve the goal of zero emissions. This is a big investment, but it will save €2.4 trillion in economic losses associated with not moving to a sustainable economy. It will also save €2.8 trillion in fossil fuel imports, among other things.