France Just Dodges Recession With Output Flat: Europe GDP Latest

(Bloomberg) -- France narrowly escaped a recession in the latter half of 2023 as exports offset weaker demand at home — offering hope that the euro zone can also dodge a downturn. 

Gross domestic product in the region’s second-largest economy stagnated in the fourth quarter, with investment and consumer spending both dwindling. That’s in line with the forecast from analysts surveyed by Bloomberg. Statistics agency Insee revised the third-quarter number up to zero from a 0.1% contraction previously.

The data kick off a marathon day of GDP numbers from the euro area, capped by a reading for the 20-nation bloc itself that analysts reckon will confirm a first recession since the pandemic. It would only be shallow, though — not enough to hasten the prospect of interest-rate cuts by the European Central Bank.

Key Developments

• Euro Zone Is Crawling Toward 2% Inflation With Shaky Landing
• ECB Could Cut Rates at Any Time This Year, Villeroy Says
• Germany Narrowly Escapes Recession But Outlook Remains Tough

Bloomberg Economics on France (8:30 a.m.)

Economist Eleonora Mavroeidi:

“The French economy held up in the fourth quarter, but domestic demand slowed — both for household consumption and investment and for business investment. Overall, this suggests the economy is still struggling in the face of tight financing conditions. It also adds some modest downside risks to our forecast for growth to gather momentum in 1Q24.”

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Lithuania GDP (8 a.m.)

The economy shrank 0.3% in the fourth quarter after stagnating in the previous three months — dragged down by industry, wholesale, retail and transport.

The result comes despite the Baltic country boasting the European Union’s strongest consumer sentiment after inflation plummeted to just over 1% in December from 20% in early 2023.

Output is suffering from weaker demand in export markets, and while it’s expected to rise in 2024 as a whole, high financing costs and geopolitical uncertainty will weigh.

French GDP (7:30 a.m.)

The economy isn’t expected to stage a quick recovery in 2024 as manufacturers heal only slowly after a lengthy slump and households continue to feel the squeeze from inflation, even as it recedes. 

The extended sluggish patch is a problem for Emmanuel Macron as his government relies on stronger expansion to repair public finances and restrain unemployment. A study by statistics agency Insee in December showed an uncharacteristically sharp acceleration would be needed to meet the forecast of 1.4% GDP growth that grounds the 2024 budget.

Macron also faces political difficulties as farmers prolong protests to demand more support and less bureaucracy from the state. He already replaced his prime minister this month in an effort to revive his presidency after a divisive debate over immigration.

Tuesday’s GDP report showed trade was the only positive contribution to growth in fourth quarter as imports declined sharply. For the whole of 2023, GDP expanded 0.9%, Insee said. 

Still, a separate publication from the statistics agency showed consumer spending was resilient in December with a 0.3% gain from the previous month. Economists had expected a stagnation after a 0.6% jump in November. 

Consumer confidence has shown tentative signs of improvement. While still below its long-term average, the measure reached its highest level since February 2022.

Coming Up (all times CET)

• Austria GDP (9 a.m.)
• Spain GDP (9 a.m.)
• Spain inflation (9 a.m.)
• Czech Republic (9 a.m.)
• Italy GDP (10 a.m.)
• Germany GDP (10 a.m.)
• Portugal GDP (10:30 a.m.)
• Euro-zone GDP (11 a.m.)
• Euro-zone confidence (11 a.m.)

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