MacroEconomic Bulletin - Second half of November 2023


According to flash figures for the November #PMIsurvey, business activity in the #Eurozone continued to decline in November 2023 (47.1 points). PMI for #USA businesses recorded a further marginal expansion in November, in line with that seen in October. Total new orders returned to growth, thereby ending a three-month sequence of contraction. Oppositely, relatively weak demand conditions and dwindling backlogs led firms to cut their workforce numbers for the first time since June 2020.

In the #U.S., #GDPgrew at a +5.2% rate in the third quarter of 2023, even stronger than first estimated (+4.9%), as a result of business investment exceeding expectations and increased government spending. In fact, government spending helped boost the Q3 estimate, rising +5.5% for the July-through-September period. Corporate profits accelerated +4.3% during the period, up sharply from the +0.8% gain in the second quarter. On the other hand, consumer spending saw a downward revision, now rising just +3.6%, compared with +4% in the initial estimate. Furthermore, the U.S. #inflation measured by the #PCE (Personal Consumption Expenditure) Price Index, was +3% year-over-year in October, down from +3.4% the previous month. The core PCE price index, likewise, rose +3.5% , in line with expectations and slightly below the previous month (+3.7%).

In the #Euroarea, #Inflation surprised on the downside in November, falling to +2.4% yoy (Flash estimate), from +2.9% in October (Consensus forecasts expected +2.7%). By components, food and services remain the biggest driver, albeit with a moderating trend. Likewise, core inflation also declined to +3.6% (+4.2%). This outlook could indicate a possible early ECB decision to lower interest rates, as inflation shows signs of deceleration. However, it is important to note that possible upturns are anticipated starting next December, due to the base effect caused by last year's declines in energy prices. This could result in a new inflationary upswing to around 3%, a situation that would continue during the first half of 2024, while the OPEP+ prepares a new oil cut that will add to these pressures.

Focusing on some of the major eurozone economies…

#Spain: According to advanced data, #inflation resumed the pace of declines in November, dropping to +3.2% yoy (+3.5% in October), favored by the moderation of tourist prices, fuel and, to a lesser extent, food. Also worth noting is the decline in the core rate, which was still more resilient, with a drop of 7 tenths of a percentage point to +4.5% (+5.2%). Thus, this data provides an estimate of the pension increase for next year, which, if confirmed, would stand at +3.8% (cumulative inflation so far this year).

#France: In November 2023, according to the INSÉE, the #inflation rate closed at +3.4%, below October's +4.0%. This decline is attributed to slowed prices in services, energy, and, to a lesser extent, manufactured products and food. Downward revision for Q32023 National account figures , showing a slight contraction in real #GDPgrowth by -0.1% (first estimate +0.1%), with a positive impact from household consumption, particularly in goods like food. Conversely, foreign trade negatively contributes to GDP growth, with a significant decline in exports and nearly stable imports. On an annual basis, economic growth lost momentum, cooling to +0.7% in 2022Q3.

#Germany: The #inflation rate  is expected to be +3.2% yoy in November 2023, marking the lowest level since June 2021 (+2.4%). The -4.5% decrease in energy prices contributed to this, driven by a base effect from the previous year. Additionally, food prices (+5.5%) showed a lesser increase compared to previous months. Core inflation is expected to be +3.8%, maintaining an elevated yet descending trend from October's +4.3%. The Federal Statistical Office (Destatis) confirms a -0.1% qoq #GDP decline in Q3 2023 (-0.4% yoy), indicating virtually stagnant economic performance in the first two quarters of the year (first quarter: 0.0%, second quarter: +0.1%). However, there are improved results in #ConsumerClimate, showing a stop of the downward trend. Consumer sentiment in Germany remains stable, with slight increases in willingness to buy, although income expectations experienced a slight decline. Economic expectations remain largely unchanged.

#Portugal: The flash #inflation indicator for November points to a decrease in inflation to +1.6% yoy (+2.1% in October), favored by the moderation of food prices. Likewise, core inflation followed a similar trend, falling to +2.9% (+3.5%).

#ESG: As COP28 unfolds, new data highlights a surge in #extremenaturalevents, underscoring a notable lack of policy action globally. The latest OECD study under the International Programme for Action on Climate (IPAC) confirms the acceleration of climate impacts, with an 11.3% increase in people exposed to extreme temperatures in OECD and partner countries from 2018-2022 compared to the last 4 decades. This has led to worsening agricultural droughts, with a 2.4% average decline in soil moisture, and a 48% rise in built-up areas exposed to coastal flooding over the past two decades. While progress has been made in setting emissions targets to achieve the Paris Agreement's 1.5°C goal, current commitments, such as a 28% GHG reduction by OECD and partner countries, fall short by 30% to meet targets. In addition, the increase in national climate actions was only 1% in 2022 and this, although not significant for policy effectiveness, may indicate lower policy implementation, especially in the context of complex international scenarios.