The economic picture during November and December reveals some divergence between Europe, on the one hand, and the US and Japan, on the other hand.
In Europe, growth slowed sharply in Q3 (-0.1% q/q in the eurozone and 0% in the United Kingdom). The initial data available for Q4 shows that the year is ending on this more negative note, which is reflected in our nowcast for the eurozone, standing at -0.1%, for Q4. Based on these figures, the eurozone slipped into recession during the second half of 2023 (a moderate and technical recession, but a recession nonetheless). In the UK, ONS data also shows negative growth in October (-0.3% m/m). By contrast, in the United States, while the economic indicators are largely in line with our scenario of a sharp slowdown in growth to 0.4% q/q in Q4 (after standing at +1.3% q/q in Q3), they are not currently indicating a risk of a contraction in activity. In Japan, after negative growth in Q3 (-0.7% q/q) following a good Q2 (+0.9% q/q), the Tankan index suggests a return to positive growth in Q4 (+0.4% q/q, according to our forecasts).
The latest inflation statistics also send out different messages, but, overall, they are still heading in the right direction, displaying a disinflationary trend. This was more pronounced in the eurozone (-0.5 pp to 2.4% y/y in November), particularly in Germany and Italy; in the United Kingdom (-0.7 pp to 3.9% y/y in November); and in Japan (-0.6 pp to 2.6% y/y for the Tokyo region in November). However, it was less pronounced in the United States, where core inflation remained stable at 4% y/y in November, in line with the ongoing strength of the labour market. In the eurozone, the labour market is deteriorating slightly and gradually, masking the differences between the countries, most notably in France and in Germany, which have been hit harder by the economic downturn.
