The range of first estimates of Q3 GDP growth is quite broad, ranging from a very positive figure in the United States (1.2% q/q) to a return to stagnation in Europe (-0.1% q/q in the euro area and 0% q/q in the United Kingdom), after a temporary acceleration in Q2. At the same time, Japanese growth posted a clear correction (-0.5% q/q) after two very positive quarters.
Without falling significantly, confidence indicators for the euro area confirm the current phase of stagnation, which is expected to continue into Q4 2023. According to the flash estimate, the composite PMI edged up by 0.6 points to 47.1 in November, while the European Commission's Economic Sentiment Indicator fell slightly in October, down by 0.1 points to 93.3 (its lowest level in three years). Despite the current deceleration in inflation (from 4.3% y/y in September to 2.9% y/y in October in harmonised terms) and an unemployment rate that is close to its lowest ever (6.5% in September), household confidence is not recovering, against a still difficult backdrop in terms of purchasing power
Germany has just experienced four quarters of stagnation or negative growth, and business climate indicators suggest that economic activity remained broadly depressed at the beginning of Q4: current conditions of economic activity remain close to their lowest levels in both the IFO survey and the ZEW survey (-80 for the latter in November). In line with this depressed environment, production in key sectors (automotive, chemicals and metals) declined again in September (in Q3, it is now nearly 15% below the peak reached at the end of 2017 for each of these sectors). Exports do not drive growth as well (-6% y/y in Q3, trade balance figures in terms of value from Destatis).
The French economy is marked by growing signs of cooling, in terms of economic activity, employment and inflation. While growth has so far remained in positive territory, the INSEE business climate, which fell to 97 in November (compared to 100 between July and September), points to a deterioration. According to this survey, the decline in economic activity already present in part of the economy (housing, food trade) has spread to industry, new construction (excluding housing) and the motor vehicles trade.
Economic surveys remain deteriorated. The PMI indices indicate a contraction in activity that is now more widespread, although the downturn is particularly pronounced in the manufacturing sector. The manufacturing PMI fell by 1.9 points to 44.9 in October, while the services PMI dropped more sharply below the 50 mark, after recording a decline of 2.2 points to 47.7. The household consumer confidence index in Italy is decorrelating from inflation expectations– which have been stable since the spring – and is now falling due to the effect of more subdued economic and employment prospects. In fact, the monthly fall in the confidence indicator (-2.4 points) was the steepest in the last fifteen months
The Harmonised Index of Consumer Prices (HICP) rose again to +3.5% y/y in October (+0.21 pp). Food inflation remains high, although it eased from September (+9.5% y/y in October, -1 pp). However, the surge in olive oil prices persisted (+73.5% y/y, +6.5 pp), contributing 0.37 points to overall inflation. As for energy, the deflation is subsiding but remains significant (-10.1% y/y, -3.7 pp). Core inflation meanwhile, eased to +3.8% over a year.
According to the initial estimate by the BEA (Bureau of Economic Analysis), the United States economy gathered significant pace in Q3, with GDP growth up +1.2% q/q (+0.7pp). This advance, the largest in seven quarters, was driven by strong household consumption (+1.0% q/q), alongside with a significant contribution of stocks (adding +0.3pp to the rate of growth). Conversely, non-residential investment stalled, following two buoyant quarters, under the combined impact of the monetary tightening and the fading of the impulse priorly provided by the IRA and the CHIPS Act.
Consumer price inflation fell sharply in October, from 6.6% y/y in September to 4.6% y/y. Nevertheless, this decrease remains limited by the strong increase in wages, which continue to put upward pressure on services prices. A 5% increase in gas and electricity prices from 1 January has also been announced. In addition, the transmission of interest rates to mortgage interest payments remains significant (+50% between October 2022 and October 2023 according to the retail price index, RPI), and is weighing heavily on households’ financial situation.
The preliminary GDP estimate for Q3 shows a contraction of -0.5% q/q, while the most recent economic surveys have confirmed the slowdown in activity. The composite PMI fell 1.6 points in October, but remained in expansionary territory, standing at 50.5. This deterioration is due to the decline in the services PMI, which was down by 2.2 points (51.6 compared to 53.8 in September). The manufacturing PMI stabilised in contraction zone at 48.7.
