The S&P Global manufacturing PMIs for the month of March point towards a pickup in economic momentum in most countries. In the Eurozone, the improvement is strong, especially in manufacturing and to a lesser degree in services. Momentum is slow however in terms of employment. In the US, the recent pickup in manufacturing sentiment is also strong compared to history [...]
In Q1 2024, business insolvencies in France reached nearly 15,000 units. This is only slightly less than in Q4 2023, which was marked by a sharp rise. Although the construction and retail trade sectors are facing a significant increase in the number of businesses affected, insolvencies in these sectors remain below historic highs. On the other hand, records were set in business services and in transport and storage services.
Our Western Europe business insolvencies index has risen above its pre-COVID level. However, it is still far below the peaks seen after the 2008 crisis and during the eurozone crisis (between 2011 and 2015). In most countries, the business insolvencies level is now higher than it was before the pandemic. This has been the case since 2022 for the UK and Sweden, which were joined by France, Belgium and Germany during 2023 [...]
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 first indicators available for January point to a continuing weak start to the quarter (after contraction in GDP of -0.3% q/q in Q4 2023), hence our forecast of a further drop in GDP of -0.1% q/q in Q1. Manufacturing production (up 1% m/m in January) remained 1.5% below the figure seen in November, due to a sharp drop in automotive production (down 10% in January from the level seen in November).
Q1 got off to a bad start, with a drop in manufacturing production in January (-1.6% m/m) linked to the shutdown of oil refineries for maintenance (with new difficulties in March), and a downturn in the automotive sector (supply problems, followed by a drop in demand affecting the production). At the same time, January’s foreign trade data do not suggest a rebound in imports of intermediate goods (inputs for other sectors).
Activity in the private sector in Italy continued to improve in February, according to the composite PMI index, which was up 0.4 points over a month, taking it to 51.1. However, unlike the current situation in Spain, the divergence between the manufacturing sector and the services sector is becoming more pronounced.
As expected, Spanish inflation slowed in February. In year-on-year terms, the Harmonised Index of Consumer Prices (HICP) rose by only 2.9% (-0.6 percentage points compared to January) due to an increase in energy price deflation, itself brought about by favourable weather conditions.1 Like other countries in the eurozone, inflation in services persists in Spain, the country remaining the main component contributing to overall inflation (contribution of 1.9 pp).
In terms of the trade balance, 2023 largely unwound the problems of 2022, which, with itsburdens and shocks, constituted an annus horribilis for French foreign trade.
According to our forecast, inflation is expected to have fallen again in March to 2.4% y/y compared to 3% in February, due to the marked easing in food prices. However, French inflation is expected to then remain between 2 and 2.5% y/y until the end of August, due to depletion of the favourable effects linked to the end of inflation on food and manufactured goods and the continuation of inflation on services, before probably falling below 2% in September.
Since 2022, the French government has reduced several types of production tax. This is the case for tax based on corporate value added (CVAE), which was reduced gradually in 2021 and 2023, and will continue to be phased out in 2024, this process coming to an end in 2027.
After the youth unemployment rate (15-24 years old) hit its lowest level for more than 30 years at the end of 2021, standing at 16.4% of the working population, it has risen slightly since then, with a figure of 17.5% in Q4 2023 (compared to 16.7% in Q1 2023). Despite being almost 3 points above the Eurozone average, this rate is still substantially lower than the 2019 one (20.8%).
Monetary anchoring is one of the main arguments put forward by central banks to justify an eponymous digital currency. According to supporters of the digital euro, a reduction in the use of paper money or even its disappearance would be the natural next step and result in the creation of a digital form of central bank currency that would be the only guaranteed way of keeping the currency anchored in the digital era. Nothing could be less obvious.
In this audiobrief, Stéphane Colliac describes France’s trade deficit for 2023 main drivers. In addition to a deficit linked to imports of hydrocarbons and a structural deficit reflecting the country’s de-industrialisation, it is also driven by France’s investment in the needs arising from the ecological and digital transition and the electrification of the car industry.
To achieve its climate goals, the European Union (EU) should cut by 90% its greenhouse gas emissions by 2040 (compared to 1990 levels), according to a recent recommendation by the European Commission. This means rapidly increasing investment in renewable energies, electricity grids, transport infrastructure and thermal renovation of buildings [...]
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.
Business climate and consumer confidence indices remained stable at a low level in February, highlighting Germany's limited economic impulse in Q1. According to our forecasts, GDP growth should be zero, after a contraction of 0.3% q/q in Q4: growth without momentum (for the time being) but also without a carryover effect (-0.2% after Q4 2023).
The last time growth was significant (in Q2 2023, with +0.6% q/q), this was explained by significant restocking (contribution of 0.5 points, after a contribution of -0.4 points in the previous quarter). A similar restocking trend could occur in Q1 2024, following a negative contribution of inventories in Q4 2023 (-0.7 points). However, this very negative figure suggests that demand in Q1 is particularly subdued, and is not expected to contribute to growth (if growth were to prove positive).
January's business confidence surveys recovered in Italy: the composite PMI index rose 2.1 points and now stands at 50.7. This improvement was driven by services, for which the PMI returned to the expansion zone after six months in contraction territory (+1.4 points, at 51.2). The companies surveyed are now reporting an increase in upcoming new business (52.5; +4.4 points), bringing employment with it (51.2) [...]
January's business confidence surveys showed signs of improvement. The composite PMI index points to an expansion in activity (51.5), driven by the ongoing solid performance of the services sector (52.1). The manufacturing sector is also seemingly enjoying a bit more tailwind at the start of this year. After ten months of contraction, the associated PMI is showing signs of recovery (49.2; +3 [...]
There is a broad consensus amongst forecasters that Eurozone quarterly growth in real GDP will gradually pick up over the year on the back of a further decline of inflation, cuts in official interest rates, investments in the energy transition and those related to NextGeneration EU. Foreign trade may also play a role. Survey data of the European Commission and S&P Global have improved since the autumn of last year but their level remains below the historical average [...]
Net issues of debt securities, cumulated over 12 months, by non-financial corporations (NFCs) were positive in December 2023 (EUR 8.3 bn) for the fourth consecutive month.
Recently an agreement has been reached between representatives of the European Council, the European Parliament, and the European Commission on a new economic governance framework. It focuses on risk-based surveillance, differentiation between member states based on their specific situation, the integration of fiscal, reform and investment objectives in a medium-term fiscal plan [...]
Despite the positive momentum it would be premature to say that the recovery has started in the Eurozone, but at least we are moving in the right direction.
Less active on the environmental front, European policy to combat climate change continues to score points in terms of decarbonization.
