(Bloomberg) — France narrowly avoided recession in the second half of last year, while Spain's economy grew at its fastest pace since mid-2022 — giving hope that the euro zone can also avoid a downturn.
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French gross domestic product stagnated in the fourth quarter as exports offset declining investment and consumer spending. In Spain, production rose 0.6%, well above the 0.2% estimated by analysts.
The data is part of a marathon day of GDP numbers from the euro area, capped by a reading for the 20-country bloc itself that analysts believe will confirm a first recession since the pandemic. However, this would only be superficial – not enough to accelerate the prospect of rate cuts by the European Central Bank.
Important developments
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The Eurozone is crawling toward 2% inflation with a shaky landing
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The ECB could cut interest rates at any time this year, says Villeroy
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Germany narrowly escapes recession, but the outlook remains difficult
Czech Republic (9 a.m.)
Outside the euro zone, the Czech economy narrowly avoided a return to recession in the final quarter of last year, growing 0.2% compared to the previous three months. Preliminary data showed exports were the main driver, while domestic demand also recovered, the statistics office said.
The government and central bank are forecasting a moderate recovery this year as real wage growth boosts private consumption. However, ongoing supply chain disruptions continue to pose risks to key manufacturing industries that rely heavily on imports of parts and materials.
Spain GDP, Inflation (9am)
According to the state statistics agency INE, the economy grew by 0.6% in the fourth quarter, largely due to household consumption. This increased growth to 2.5% in 2023.
The country has recently been an outperformer compared to other major euro zone countries, having suffered a sharper contraction than most during the pandemic. The government wants to slowly phase out the aid packages after Russia's war in Ukraine caused energy costs to skyrocket. However, the majority of them have been postponed until 2024 as it continues to support the economy.
Separately, Spanish inflation unexpectedly rose to 3.5% in January from a year earlier, beating the 3% estimate in a Bloomberg survey of economists. This is the first price data at the start of the year from a major euro zone member and could dash hopes that December's rise was an isolated incident.
Austria GDP (9 a.m.)
The country ended a six-month recession in the fourth quarter as output rose 0.2%. Nevertheless, GDP fell by 0.7% in 2023 as a whole.
“The domestic economy stabilized at a low level at the end of the year,” said the Wifo Institute, which compiles the Austrian government’s statistics. “While the first signs of bottoming out can be seen in industry, the service sectors developed heterogeneously. Consumer and investment demand remained subdued.”
Bloomberg Economics on France (8:30 a.m.)
Economist Eleonora Mavroeidi:
“The French economy held up in the fourth quarter, but domestic demand slowed – both for household consumption and investment and for business investment. Overall, this suggests that the economy is still struggling given tight financing conditions. It also raises some moderate downside risks to our forecast that growth will gain momentum in Q1 2024.”
GDP Lithuania (8 a.m.)
The economy shrank 0.3% in the fourth quarter after stagnating in the previous three months, weighed down by industry, wholesale, retail and transport.
The result comes even as the Baltic country has the strongest consumer sentiment in the European Union after inflation fell to just over 1% in December from 20% at the start of 2023.
Production is suffering from weaker demand in export markets and while it is expected to increase throughout 2024, high financing costs and geopolitical uncertainty will weigh.
French GDP (7:30 a.m.)
France's value was in line with the estimate of analysts surveyed by Bloomberg. For all of 2023, GDP grew 0.9%, according to statistics agency Insee, which also revised the third-quarter figure to zero from a previous 0.1% decline.
The economy is not expected to recover quickly in 2024 as manufacturers are slow to recover after a long slump and households continue to feel the pressure of inflation even as it eases.
The ongoing slump poses a problem for Emmanuel Macron as his government relies on greater expansion to repair public finances and curb unemployment. A December study by statistics agency Insee showed an unusually strong acceleration would be needed to meet the 1.4% GDP growth forecast underlying the 2024 budget.
Macron also faces political difficulties as farmers extend their protests to demand more support and less bureaucracy from the state. He has already replaced his prime minister this month in a bid to revive his presidency after a contentious debate over immigration.
Still, a separate release from the statistics agency showed consumer spending was robust in December, rising 0.3% from the previous month. Economists had expected stagnation after a 0.6% rise in November.
Consumer confidence has shown early signs of improvement. Although the metric is still below its long-term average, it reached its highest level since February 2022.
Coming soon (all times CET)
– With support from Joel Rinneby, Barbara Sladkowska, Ainhoa Goyeneche, Alexander Weber, Sonja Wind, Alessandra Migliaccio, Milda Seputyte, Marton Eder, Joao Lima, Giovanni Salzano and Peter Laca.
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