In April and May, there was a relative deterioration in the main OECD economies, with some divergences in the magnitude and extent of this deterioration across the economies. In Europe, the deterioration observed in the manufacturing sector over the past few months is beginning to spread to services, where confidence indices have begun a downward trend. In the United States, the ISM non-manufacturing rose moderately in April, compared to an ISM manufacturing index below 50 for the sixth consecutive month.
Eurozone growth in the first quarter of 2023 was +0.1% q/q according to the data available at the time of writing. This is below our forecast (+0.3% q/q), and therefore rather disappointing, even if it surprises favourably compared to our nowcast estimate (-0.0%). This low growth also puts into perspective the perceived resilience coming from most survey and activity data during the first quarter.
Industrial activity and new industrial orders experienced sizeable variability in Q1, with a strong rebound in January-February followed by a sharp drop in March. Overall, new orders remained stable during the first quarter (q/q). The IFO survey has even deteriorated in May, and the ZEW index has returned to negative territory.
The business climate surveys from the French National Institute of Statistics and Economic Studies (INSEE) deteriorated in April and May, raising fears that the upturn in business activity seen during the first quarter was temporary to a certain extent.
The preliminary estimate of Italian economic growth in the first quarter was a positive surprise, with real GDP rebounding by 0.5% q/q. However, we anticipate a slowdown in activity in Q2, before a contraction in Q3. At 0.9% in 2023, Italian GDP growth would still be above that of the eurozone as a whole.
Spanish growth strengthened slightly in Q1 2023, to +0.5% q/q, according to preliminary figures from INE. However, this acceleration, supported by investment and external demand, did not allow real GDP to cross the pre-Covid threshold. It still showed a small deficit of 0.2% compared to Q4 2019.
In the first quarter of 2023, US growth was +0.3% q/q. This is well below expectations: the figure is half the GDPNow estimate of the Federal Reserve Bank of Atlanta and our forecast (0.6%). Growth appears then not to be so impervious to the inflationary shock and the monetary tightening implemented to cope with it.
The UK economy grew 0.1% q/q during Q1 2023, at the same pace as during Q4 2022. Growth was erratic in the first quarter. Real GDP initially bounced back in January (+0.5% m/m) following a contraction in December (-0.5% m/m), buoyed by the services sector (+0.8% m/m).
Japanese growth picked up again during Q1 2023, posting an increase of +0.4% q/q. However, this upturn needs to be put into perspective, as it follows two disappointing quarters (-0.2% q/q in Q3 2022 and 0.0% q/q in Q4 2022). As a result, Japanese GDP is still at the same level as in Q2 2022.
