Economic indicators quarterly changes 
GDP growthIndustrial activity saw a clear upturn in January (+3.5% m/m), after a significant downturn in December (-2.4% m/m). For example, intermediate goods and construction, which fell sharply in December, returned to a level of production close to that of November (indeed even higher for construction). Business climate surveys indicate a notable improvement in the economy, including the IFO index which recovered from 84.4 in October 2022 to 91.1 in February 2023. However, the continued quite low level of this index suggests relatively sluggish activity, aside from the improvement seen in January.
Private consumption fell sharply by 1% q/q in the 4th quarter of 2022, as a result of the lowest level of consumer confidence seen in October (-42.8 according to GFK). However, the latter has since recovered (-30.5 in March 2023), an improvement supported by household expectations, whether economic or in relation to income: indices at +6 and -27.3 respectively in February, or around 28 and 40 points above their September levels.
This sentiment that the worst may be over aligns with the movements in inflation: a peak in October 2022 (11.6% y/y) before a decrease, due to the freezing of energy prices by the federal government. Disinflation, however, remains gradual, with an increase in prices of 9.3% y/y in February (9.2% in January), while core inflation still stood at 5.2% y/y in February after 5.4% y/y in December.
According to the IFO survey the employment climate has improved since the low point recorded in October 2022 (97.8), but only slightly (99.4 in February) when compared to past levels (index above 100 between May 2021 and August 2022). Job creation picked up in January 2023 (+64K, or 0.14% m/m). However, this dynamic probably includes a catch-up effect following the slowdown in the 2nd half of 2022, in the context of still significant labour shortages.
After negative growth in the 4th quarter of 2022 (-0.4% q/q), we forecast a new negative figure in the 1st quarter of 2023 (-0.2% q/q). However, the latest economic data implies some upside risk in this forecast.
Stéphane Colliac (article completed on 20/03/2023)
