Based in Paris, BNP Paribas' Economic Research Department is composed of economists and statisticians:
The Economic Research department’s mission is to cater to the economic research needs of the clients, business lines and functions of BNP Paribas. Our team of economists and statisticians covers a large number of advanced, developing and emerging countries, the real economy, financial markets and banking. As we foster the sharing of our research output with anyone who is interested in the economic situation or who needs insight into specific economic issues, this website presents our analysis, videos and podcasts.
+ 33 1 55 77 71 89 guillaume.a.derrien@bnpparibas.com
L’Organisation mondiale du commerce (OMC) a publié en avril son dernier jeu de prévisions dont le message est plutôt positif1. Après un repli de 1,2% en 2023, le volume des échanges mondiaux en biens rebondirait de 2,6% en 2024, une progression peu ou prou en ligne avec la croissance de l’économie mondiale, attendue par l’OMC à 2,7%. Parmi les principaux soutiens au commerce mondial, l’organisation de Genève met en avant la baisse anticipée de l’inflation en 2024 et 2025. Celle-ci permettrait de soutenir le pouvoir d’achat et, par conséquent, la consommation de biens manufacturés.
After two years of deficit, the EU trade balance returned to positive territory in 2023, supported in particular by falling energy prices. Trade surplus in traditionally buoyant sectors (pharmaceuticals, automotive) remains at historically high levels. China’s ramp-up to higher value-added sectors has, over the years, led to a deterioration in the EU’s trade balance with the country. Among other things, imports of motor vehicles from China tripled between 2019 and 2023.
After two years – 2021 and 2022 – of significant improvement linked to the post-Covid recovery in activity, 2023 marked a halt in the recovery of public finances in the euro area. According to preliminary results published on Monday by Eurostat, the public deficit narrowed in 2023 by only 0.1 point of GDP, to 3.6%. The primary deficit also fell by the same magnitude, to 1.9% of GDP.
Economic activity in the eurozone is expected to gradually pick up over the course of 2024, buoyed by improving household purchasing power and falling interest rates. However, the industrial sector in the eurozone is facing major structural problems, which will not (or will only slightly) be addressed by lowering the ECB’s policy rates. The ramp-up of the EU’s recovery fund should, in theory, enable southern eurozone countries, which are the main recipients, to outperform again in 2024. However, so far, its effects have been relatively limited and the implementation problems, as highlighted in a recent European Commission report, will not go away completely this year.
The economic outlook in the UK is still challenging. After a year 2023 marked by a gradual deterioration in activity (a slowdown in the first half of the year, followed by a contraction in the second half), GDP growth is expected to remain slightly positive in 2024. With the general election, scheduled to be held at the end of the year, Prime Minister Rishi Sunak, who is facing difficulties within the Conservative party, is struggling to reassure households who are bearing the full brunt of rising costs of living and interest rates. Despite a recovery in purchasing power and the resilience in the labour market, private consumption remains depressed
Despite the rebound in the United States, inflation continues overall to slow in the G7 countries and in the euro area as a whole. In Japan, keeping consumer prices above 2% will remain complicated in the short term, due to the loss of momentum observed this winter: inflation rebounded in February due to base effects, but the 3m/3M annualised rate fell back to 1.3%. The decline in the 3m/3m annualised rate is more marked in services, down to only 0.4%. The wage increase granted following the annual wage negotiations (Shunto): 5.3% in total, including 3.7% in base salary, will nevertheless support the BoJ in its (very gradual) attempt to normalise monetary policy
Tensions on global maritime freight have eased in recent weeks but remain significant and the outlook uncertain due to the disruptions in the Red Sea. The global supply-chain tension index – from the Federal Reserve Bank of New York – rose above its long-term average in February for the first time since January 2023. But the Freightos and Baltic indices both fell nearly 15% in the first three weeks of March.
Disinflation in the euro zone continues to buoy household confidence. The European Commission index rose by 0.6 points to 14.9 points in March, according to the flash estimate. This is its highest level since February 2022 and the start of the war in Ukraine.
The UK economy remains deteriorated, but the latest activity figures show a slight improvement at the beginning of 2024. The monthly ONS estimate indicates growth in added value of 0.2% m/m in January, buoyed by a rebound in retail and wholesale (+1.8% m/m) and construction (+1.1% m/m). Nevertheless, this follows a difficult second half of 2023, marked by a 0.5% drop in real GDP.
Consumer price disinflation stalled at the beginning of the year in Europe and the United States. With the tailwinds of energy price deflation fading, core inflation, which is still high, now accounts for almost all of the price increases in the United States. This is less true in the euro area and the United Kingdom, where food inflation still contributed almost a third to headline inflation in January. The decline in inflation in 2023 has led, in all areas, to a downward shift in household inflation expectations in the short-term (1 year) towards long-term expectations (5 years). Wage growth continues to outpace inflation and fuel a recovery in purchasing power, which appears to be stronger in the United States and the euro area than in the United Kingdom.
With zero growth in the last quarter of 2023, the Eurozone has narrowly escaped recession, but economic activity is still hanging by a thread. Over 2023 as a whole, the increase in real GDP just reached 0.5%, and the carry-over effect for 2024 is null, as a result of a second half that was even weaker than the first one. Nevertheless, our Nowcast currently indicates growth of 0.3% q/q in Q1 2024, which is higher than our December forecast.
The economic situation in the UK continued to deteriorate in Q4 2023. Real GDP contracted 0.3% q/q, after falling 0.1% q/q in Q3. Although economic activity remained marginally in positive territory for 2023 as a whole (with 0.1% growth), it deteriorated throughout the year, resulting in a negative carry-over effect for 2024. The growth outlook for 2024 is even more unfavourable, as economic activity is expected to stagnate in H1 before a sluggish recovery from summer onwards.
Global maritime freight stabilised in February after the previous month’s sharp rise following the escalation of tensions in the Red Sea. The Freightos index is currently stable, with a decline even observed on routes between China and Europe which had been most directly affected by the conflict in the Middle East and by the rise in transport costs. The New York Federal Reserve’s global supply chain pressure index was unchanged in January but is expected to rise again in February, reflecting longer delivery times in the PMIs.
Jeremy Hunt's announcement of the Spring Budget on 6 March will once again be a balancing act for the British Chancellor of the Exchequer. He has the difficult task of supporting an economy whose activity is stalling and investment needs are increasing, while trying to reverse the trajectory of the public deficit, which widened in 2023.
Headline inflation has stabilised in recent months in the United States, the euro area and the United Kingdom, while it has declined in Japan. Core inflation continues to fall and its decrease is broad-based. Aggregate indicators of price pressures, calculated using PMI surveys, deteriorated again amid longer delivery times linked to the ongoing disruptions to global maritime trade. The PMI input price indices are also up in the US and the UK (page 18).
Faced with a natural disaster and a political crisis, 2024 is off to a rocky start for Japan. However, the economic impacts of the earthquake that struck the country’s west coast on 1st January 2024 are expected to be fairly limited due to the authorities’ effective preparations and quick response in dealing with this type of event. After an expected growth of +0.4% q/q in the fourth quarter of 2023, activity should slow in the first quarter of 2024, although it will remain positive at 0.2% q/q. The fall in inflation and bond yields at the end of 2023 is providing some breathing room for the BoJ, which is expected to end its negative interest rate policy in March or April
Eurozone activity is expected to pick up moderately in 2024, buoyed by the fall in inflation and the start of a cutting cycle of policy rates, which, according to our forecasts, will take place in April. The labour market continues to surprise on the upside. However, industrial production is falling sharply and remains highly exposed to escalating tensions in the Red Sea and the repercussions on shipping and supply chains. 2024 will see a number of national parliamentary and presidential elections (Finland, Portugal, Belgium, Austria) and the European elections (6 to 9 June), which are likely to redraw the political landscape in the region and the balance of power within the European Parliament.
Greece is expected to enjoy economic growth once again in 2024, but activity showed signs of slowing down in the second half of 2023. Real GDP stagnated in Q3 2023 and employment fell by 0.5% q/q. While strong tourism activity, against a backdrop of high inflation, is boosting tax revenue, its impact on real GDP is more muted. The sharp drop in the unemployment rate (which is now below 10%), the drastic improvement in public finances and the decline in public and private debt testify to Greece’s solid recovery, which has been welcomed by the rise in equity and bond markets, and by the sharp tightening of spreads between Greek sovereign debt and the German Bund
The UK economy is flirting with recession. The downturn in activity in the second half of 2023 is expected to continue until spring 2024 before an expected sluggish recovery, which nonetheless will be supported by the Bank of England (BoE) beginning its monetary easing cycle. Despite an uptick in December 2023, inflation remains on its downward trajectory, which is clearly reflected in production prices and CBI surveys. The turnaround in the labour market, which is still muted, is helping to reduce upward pressures on wages. While this is good news for inflationary momentum, it is also weakening private consumption. The BoE has little room for manoeuvre, with an initial policy rate cut expected to occur in June 2024
The Red Sea conflict has already had a substantial impact on global shipping. While maritime freight prices are, at this stage, still well below the levels seen in 2021, when the global economy was recovering post-lockdown, they have spiked in January 2024. The Freightos index (chart 5) shows that transportation costs have tripled on average compared to the end of last year. Due to their geographical locations, China and Europe have been the regions most directly affected by these disruptions, and are already facing threefold (China-Europe route) to fivefold (Europe-China route) increases in transportation costs. However, the effects are gradually being felt on all global shipping routes
The eurozone narrowly escaped economic contraction in the last quarter of 2023, but the picture is mixed among countries. According to preliminary figures from Eurostat, real GDP in the euro area remained stable in Q4, following a slight decline of 0.1% q/q in Q3. Quarterly growth surprised to the upside in Spain (+0.6%), Italy (+0.2%), while the data for France (0.0%) and Germany (-0.3%) were in line with the consensus. The largest decline in the euro area came from Ireland (-0.7%) while Portugal’s growth rose the most (+0.8%).
Because of its significance and its many connections with the real and financial spheres, the residential property sector plays a central role in the economic cycle. The acceleration in property prices in the eurozone, which began in 2014, the year in which the monetary bloc emerged from recession, intensified after the "Great Lockdown" of 2020, peaking at almost 10% year-on-year in the first quarter of 2022. The tightening of monetary policy by the European Central Bank, unprecedented in its scale and speed, seems to have put a halt to this progress, although at this stage there are significant differences between countries. Economies where the property market had withstood the subprime crisis better now appear to be in greater difficulty in the face of tighter credit conditions
Inflation regained ground in the United States and the euro area in December, rising from 3.1% to 3.4% and from 2.4% to 2.9% year-on-year respectively. However, the breakeven inflation rates (10-year bonds) for the four major eurozone economies have fallen below those of the United States. The breakeven rate has also dropped in the United Kingdom, where the inflationary environment has improved, although it remains more deteriorated than in the other areas.
The Bank of Japan’s latest Tankan survey, published in December, highlights the country’s significant labour shortages and recruitment challenges. These are affecting all sectors and are even reaching record levels in almost a quarter of them. In order to facilitate the interpretation, the data in this table are converted in Z-score, which measures the number of standard deviations separating each index from its long-term average (1974-2023 period).
The end of the year is shaping up to be a difficult one for the eurozone, as displayed by the flash PMI indicators for December. The composite index, fell by 0.6 points to 47, and remains below the threshold of 50 (in contraction territory) for the seventh month in a row. The employment index has not plummeted, but has been gradually declining since April, reaching 49.6 in December, its lowest level in three years. At 6.5% in October, the unemployment rate in the eurozone stabilised at a historically-low level, which is increasingly looking like a floor. We expect the jobless rate to rise slightly over the next few months, in line with current trends in the PMI indices. The unemployment rate for young people (under 25) has already risen by one percentage point in six months, to 14
