While it might have been hoped that the current drop in inflation would provide a stronger boost to household confidence, this, and consequently consumption, remains constrained. This is due to the impact of rising interest rates on purchasing intentions in both France and Germany.
In June, the main OECD economies experienced divergent trends, raising the question of the tipping point between a situation where growth continues – with inflationary pressures requiring further monetary tightening – and another where it slows down further and where the fall in inflation means that an end to rate hikes can be envisaged.
Despite the support of tourism, which has been at levels close to those of 2019 since the beginning of the year, the effects of the rise in interest rates and the drop in household purchasing power on the Spanish economy should worsen over the course of the year.
Continuing the downturn observed in April, INSEE’s business climate indicator fell again in May to 100, the lowest since April 2021. The downturn is widespread and particularly noteworthy regarding the manufacturing sector, where the confidence index even fell to 99, below its long-term average (100) for the first time since March 2021. At the same time, inflationary pressures are continuing to ease.
Economic indicators for the month of April 2023 suggest that China’s economic recovery is rapidly running out of steam. Granted, health restrictions were lifted recently (December 2022) and there are still some major post-Covid catching-up effects that are bolstering household demand. However, growth in other demand components has weakened.
New factory orders in the industry fell sharply in Germany in March, after a fairly significant increase in February. Overall, these developments are offsetting each other. A very moderate increase over Q1 (0.2% q/q) is consistent with GDP growth, published at 0% q/q for Q1.
The French economy recorded GDP growth of 0.2% q/q in Q1, split between factors of resilience and weakness.
The European Commission survey of consumer confidence has found, over the past four months, a marked improvement amongst German consumers, driven by an upturn in their expectations for the general economic situation. Conversely, French consumer confidence remains depressed and is still not showing any sign of improvement. Assessments of the past situation are also diverging, with that in Germany also improving, albeit to a lesser extent.
The Federal Reserve’s Senior Loan Officer Opinion Survey sheds light on how changes in monetary policy influence banks’ credit standards and expected loan demand. Based on the historical relationships, the latest survey points towards a high likelihood of average negative growth of the volume of company and household investments over the next several quarters. Moreover, recent research shows that since 2009, the maximum impact of monetary policy on inflation may be reached more quickly. Based on the relationship between credit standards, expected credit demand and investments by companies and households, as well as on the possibility that transmission lags have shortened, decisions by the Federal Reserve will more than ever be data-dependent.
The latest economic indicators updated on February 20, 2023 and the coming calendar
The improved business climate points to a risk of an upwards revision in our current estimate of contraction in Spain’s GDP in Q1 2023. The composite PMI topped the 50-point threshold in January at 51.6, five months after slipping below this level. This rebound can be attributed to services (52.7), while further contraction was seen in manufacturing activity (48.4). While manufacturing production increased by 0.8% m/m in December and 2.8% in 2022, it has only just closed the gap relative to 2019.
GDP growth surprisingly increased in the 4th quarter, reaching +0.1% q/q (after +0.2% q/q in the 3rd quarter), compared with -0.2% based on our forecast. Corporate investment was one of the factors behind this relative resilience, with a further rise of 1.2% q/q (having already grown by 3.8% q/q in the 3rd quarter). Conversely, consumer spending was undoubtedly the weak link in demand, with a drop of 0.9% q/q.
The worldwide fall in Covid-19 cases has continued for the fifth consecutive week. 1.8 million new cases were reported between 20 and 26 January, down 27% from the previous week. The weekly GDP proxy indicator has recovered significantly in Germany, France, Belgium and Italy, while it remains relatively stable in Spain. In the United States, the United Kingdom and Japan, an increase over the latest data points can be noted
Between 4 and 10 January, 3.4 million new cases of Covid-19 were recorded worldwide, representing a fall of -3% compared to the previous week. This is the third consecutive week of falling infections following seven weeks of almost continuous increases. The number of new cases continues to fall sharply in South America (-24%) and, to a lesser extent, in Europe (-12%).
3.9 million new cases were counted between 7 and 13 December, compared with approximately 3.6 million the previous week, representing an increase of 8.3%. This is the fifth consecutive week of rising infections, a development that is all the more noteworthy as all regions reported an increase in weekly cases, with the exception of Africa, which reported a fall of 17%.
In Turkey, growth has held up well (+4% year-on-year in Q3 2022) despite the rise in inflation. Consumer spending was the main supporting element, with an increase of 18%. However, the acceleration in inflation (from 19% year-on-year in Q3 2021 to 74% in Q2 2022) led to a contraction in the wage bill in real terms up to Q2 2022, despite a strong recovery in employment. Since mid-2022, inflation has continued to accelerate (+84.4% in November) but a wages catch-up has occurred following the revaluation of the minimum wage. However, this cannot explain the difference between consumption and the wage bill purchasing power.
The number of new Covid-19 cases continues to increase across the world for the third consecutive week. 3.2 million new infections were recorded between 24 and 30 November, up 10% on the previous week. This rise was seen across all regions, with the exception of North America, where the number of cases fell by 12%.
Between 17 and 23 November, 2.9 million new cases of Covid-19 were recorded worldwide, an increase of 13% on the previous week. This is the second consecutive week with an increased number of infections. All the regions of the world are affected, with South America notable for a significant resurgence in cases.
After falling for a month, Covid-19 pandemic figures are again rising slightly in most regions of the world, but remain at a low level. The weekly proxy indicator for GDP is relatively stable or even on a slightly downward trend in the United States, France, Germany, Spain, Belgium and Japan.
The number of new Covid-19 cases continues to decline in most parts of the world. For the first time since 20 October 2021, the number of infections has fallen below 3 million per week (seven-day moving average). Thus, 2.45 million new cases were recorded between 27 October and 3 November 2022, a 15% drop compared to the previous week (Chart 1). More generally, the number of new cases continued to fall sharply in Europe (-34%) and, to a lesser extent, Africa (-8%), while it stabilised in North and South America. In Asia, the number of cases is on the rise again (+11%), particularly in Japan (333,980, +25%), South Korea (293,934, +35%) and Taiwan (270,077, -3%).
Chinese economic activity recovered in Q3 2022 (+3.9% quarter-on-quarter and +3.9% year-on-year) following the contraction seen during the lockdown period in Q2 (-2.7% q/q and +0.4% y/y.). The recovery was mainly driven by the industrial sector and helped by the support measures taken by the authorities. In particular, higher public investment stimulated construction activity in infrastructure and tax incentives encouraged car sales. On the other hand, the easing of domestic credit conditions and the support measures for property developers had a very limited impact, and the contraction in the property sector continued. The weakness in private consumption and in activity in the services sector is a cause for concern
The growth in the number of new Covid-19 cases continued for the fourth consecutive week in Europe. According to the latest data from Johns Hopkins University, European countries have recorded 59% (1.92 million out of a global total of 3.25 million) of new Covid-19 infections diagnosed in the last seven days (chart 1). In that region, the highest number of infections was recorded by Germany (632,167, +54%), followed by France (382,191, +21%), Italy (282,347, +26%), Russia (156,489, -26%) and Austria (95,894, +20%). The five countries account for 81.4% of new cases in Europe.
The weekly number of new cases of Covid-19 in Europe has continued to increase, for the third consecutive week, with 1.7 million new infections between 29 September and 5 October, an increase of 17% compared to the previous week. The number of people frequenting shops and leisure facilities is very slightly above its pre-pandemic level in Belgium, while it has recently gone back to slightly below this level in Italy. However it remains somewhat more noticeably below pre-Covid levels in the rest of our sample (France, Germany, Spain, Japan, the United Kingdom and the United States).
3.4 million new Covid-19 cases were recorded worldwide from 14–21 September, a fall of 4% compared to the previous week. This is the smallest decrease since August last year. All regions of the world are affected with the notable exception of Europe, which recorded an increase for the first time since last July (an 18% rise). Of the 3.4 million new cases making up the worldwide total, 1.3 million were reported in Europe (38.2% of all cases).
The downward trend in the number of new COVID-19 cases has continued worldwide for the seventh consecutive week. 3.6 million cases were reported between 6 and 12 September, down 16% from the previous week (Chart 1). Overall, the situation is continuing to improve noticeably in South America (-33%), North America (-20%) and Asia (-18%), but it has stabilised in Europe after falling for eight weeks. In Africa, the number of cases fell again (-12%) after rising slightly during the previous week. Meanwhile, vaccination campaigns are continuing to progress worldwide, but at a much slower pace. Sixty-eight percent of the world’s population has received at least one dose of a vaccine (Chart 2).
