Eurozone avoids recession, but stagnation continues as Germany struggles

The region's economy, which shares the euro, remained stagnant last year and remained virtually stationary.

In the last three months of 2023, economic output in the euro area was flat, but expanded slightly in the EU. Eurostat's initial estimates were confirmed.

The stagnation in the eurozone economy follows a 0.1% contraction in the previous quarter, meaning the eurozone has avoided recession and effectively avoided a second consecutive quarter of decline in gross domestic product.

The economy has shown no signs of strength over the past year, contracting or growing by just 0.1% since the start of 2023.

Even in year-on-year comparisons, the numbers suggest economic stagnation, with seasonally adjusted GDP increasing by 0.1% at the end of 2023, following stagnation in the previous three months.

Barclays analysis says the weak performance is due to phenomenal domestic demand, particularly investment. Among the countries that performed well, the investment bank said France's stagnation was a positive surprise compared to the expected contraction, while Italy and Spain, the region's third and fourth largest economies, each received a 0.2 % and 0.6% growth, demonstrating resilience.

Meanwhile, Germany's performance continued to be weak, with GDP contracting by 0.3% in the quarter and 0.2% on an annual basis.

According to Eurostat, looking at the situation in Europe as a whole, the biggest economic downturn is Irish economy contracted by -4.8%compared to the last three months of the previous year, followed by Estonia (-3%) and Finland (-1.3%).

The European Union's GDP expanded slightly by 0.1% compared to the previous three months, and by 0.3% when lined up with national performance in the previous three months.

More and more jobs in Europe

Eurostat's preliminary estimates show that the number of people employed in the fourth quarter of 2023 increased by 0.3% in both the euro area and the EU compared to the previous three months. This means that 169.3 million people are employed in the euro area.

Employment also expanded by 1.3% in the euro area and 1.2% in the EU compared to the last three months of last year.

The labor market is showing signs of activity, with the latest figures suggesting a second consecutive year of growth.

Complex situation between EU economies

Several EU countries report separately on their economies, sending mixed signals about the situation in Europe.

Finland's dark moments

Finland, which shares the same currency within the bloc, has fared particularly poorly.

The economy, which accounts for 1.7% of the EU's overall GDP, fell into a technical recession at the end of the year as output fell for two consecutive quarters. GDP contracted 0.4% quarter-on-quarter in the last three months of 2023, after falling 0.9% in the three months to September.

In terms of annual comparison, GDP in the fourth quarter of 2023 contracted by 1.3%, following a 1.2% decline in the previous quarter, marking the sharpest economic contraction in almost three years.

The Bank of Finland announced earlier this year that it expects the country's GDP to contract by 0.5% in 2023 and 0.2% this year.

The central bank blames the economic downturn on a lagging export market, which it expects to recover in the second half of the year, and households' purchasing power to improve as inflation slows rapidly. In other words, it is an expectation that applies to the entire euro area.

good news from the netherlands

Driven by strong household consumption, the Dutch economy returned to growth on a quarter-on-quarter basis, expanding by 0.3% in the last three months of 2023 after nine consecutive months of contraction.

But on an annual basis, GDP still shrank by 0.5%, following a 0.8% decline in the previous quarter, according to the country's statistics agency's first estimates.

Romania's ups and downs

Romania's GDP statistics sent mixed signals to the market. According to provisional estimates from the National Institute of Statistics, the seasonally adjusted production value for the past three months of 2023 shrank by 0.4% compared to the previous quarter. However, on an annual basis, the economy expanded by 2.9%, exceeding market expectations.

Hungary back on track

Romania's neighbor Hungary has just recovered from negative territory. Annual GDP stagnated in the final quarter of 2023 after three consecutive quarters of contraction.

Compared to the previous quarter, Hungary's GDP also stagnated after increasing by 0.8% at one point, ahead of four consecutive quarters of negative growth, according to figures from the Hungarian Central Statistical Office.

Worrying signs in Poland

Poland, the EU's largest economy that does not use the euro, also reported stagnant economic performance for the period compared to the previous quarter, following 1.1% growth in the past three months. Compared to the same period last year, production in the past three months was 223%, accelerating from 0.5% to 1%.

Norway is showing the way

Norway's non-EU economy is back on track, according to the latest GDP data.

According to the Nordic country's statistics office, its output increased by 1.5% quarter-on-quarter in the last three months of 2023, following a 0.4% contraction in the previous quarter.

This growth was mainly driven by Norway's oil and gas sector following sanctions against Russia. The weaker Norwegian krone also supported the recovery in exports, which rose 3.3% after falling 1.3% in the previous three months. However, domestic demand remains sluggish.

Mainland Norway's GDP, excluding fossil fuels and shipping, expanded by 0.2% quarter-on-quarter, mainly due to strong performance in the health and financial sectors.

Year-on-year, overall GDP growth was 0.5% in the final quarter of 2023, after contracting by 1.9% in the previous three months.

Source link

What's Hot