In the first quarter, real GDP growth in the United States and the Eurozone was almost on a par, at a quarterly rate of 0.4% for the United States and 0.3% for the Eurozone, according to initial estimates. However, on a year-on-year basis, the situation remains very much to the United States’ advantage, with growth of 3% when Eurozone growth is only 0.4%.
But for the US, this is a counter-performance as the economy slowed sharply, growing half as fast as in the previous quarter and less than expected. In the Eurozone, on the other hand, growth has increased and exceeded expectations, allowing the region to emerge from just over a year of stagnation. Moreover, growth was better than expected in Germany, France, Italy, and Spain, this latter country continuing to outperform the Eurozone average. And in France, the growth breakdown was also encouraging, with household consumption a bit stronger and corporate investment rebounding.
These developments are in line with our scenario of a soft landing for the US economy and a gradual take-off of the Eurozone. In 2024, the growth gap would still be very large because the United States benefits from a strong growth carry-over effect, but in 2025, the annual average growth rates would be almost identical according to our forecasts.
This catching-up of Eurozone growth with that in the US is a hopeful sign. However, it is based on a relatively optimistic scenario. And it is still only a small step, if it is confirmed, in view of the large economic divide between the two regions, especially since 2020. To illustrate this growth divide, one can have in mind the figure of 30%: it represents the difference, in 2023, between European and US GDP, measured per capita and at purchasing power parity.
At the same time, Europe’s underperformance means that there is great potential for catching up. The Letta report (on the single market), the Noyer report (on the European capital markets) and the coming Draghi report (on competitiveness) all seek to put in place the conditions for this new start. Europe needs to upgrade its economy, quickly, and to promote a new model of economic development that meets the climate and social challenges. Thank you for watching today and tune in next week for a new edition of EcoTV.
