Earlier this week, Hungary published its GDP data for the first quarter. It fell by 0.2 % compared with the previous quarter after -0.6% in Q4 and -0.8% in Q3. This is not a major surprise given that high frequency indicators such as retail sales and industrial production were already pointing to a weakening in economic activity. Elsewhere, in the region, GDP growth was also soft though we observe a better performance in Czech Republic Romania and Poland. The Hungarian economy is experiencing numerous challenges while some positive developments provide some relief.
Central banks' decisions influence markets, households and businesses. It is therefore necessary to understand how they will react to incoming data. The Federal Reserve and the ECB have similar reaction functions but offer different guidance because of the differences in terms of economic environment, particularly with respect to real interest rates.
Growth in the French economy recovered slightly in Q1 2023, rising to 0.2% q/q following the relative stagnation seen during the second half of 2022. Despite the strengths driving this recovery, the French economy is also exposed to some weaknesses. An analysis across three sectors (transport equipment (including cars), food and housing), gives us an insight into these conflicting forces which imply that while growth is still positive, it can be very different across sectors.
The current inflationary situation is unprecedented in many respects. Indeed, some of its strength lies in the ability of firms to pass on the rise in their production costs in their selling prices. This is known as pricing power. And it allows companies to preserve their margins in a difficult environment.
Emerging markets exports contracted sharply in late 2022-early 2023, particularly in Asia due to the turnaround in the global electronic cycle. But US/China structural decoupling is probably already at work.
The candidate of the outgoing majority, Bola Tinubu, won a close victory in the presidential elections of February 25. Coming challenges are significant: revive the first African economic power and consolidate macroeconomic stability, which has deteriorated dangerously despite high global oil prices.
