Economic data for April and May augur a relatively good Q2 in terms of growth, despite some continuing dichotomies.
In the euro zone, after a Q1 2024 that surprised on the upside (+0.3% q/q), we expect growth to continue at the same rate in Q2, a forecast confirmed by the upturn in business climate surveys, particularly in services. While on the demand side, continued disinflation and rising real wages are supporting factors, these latter are still barely being reflected in household confidence and consumption.
The situation appears less ambivalent in the US, where the GDPNow model is predicting higher growth in Q2 (0.9% q/q) than in Q1 (0.6% q/q). Inflation fell slightly in April and the labour market has remained relatively dynamic, despite showing more unmistakable signs of a downturn.
Momentum is less favourable in the United Kingdom, where the high growth figure in Q1 (+0.6% q/q) is somewhat misleading. This figure was buoyed by a sharp drop in imports while domestic demand has remained lacklustre, despite inflation approaching the 2% target.
And lastly, in Japan, the contraction of GDP in Q1 (-0.5% q/q) is due to exceptional circumstances, and growth is expected to recover in Q2.
In terms of inflation, developments in the Eurozone are favourable enough for us to anticipate that the ECB will proceed to cut its key rates for the first time in June, unlike the BoE (August) or the Fed (December), where progress remains insufficient. Across the board, the momentum of the labour market and its positive impact on wages, along with the persistence of inflation in services partially resulting from this, are all factors that, inhibiting general disinflation, are likely to limit the size of future rate cuts (or even delay them in the US or the UK). In Japan, continued monetary tightening is the order of the day (which we anticipate for September).
Article completed on 29 May 2024
