France’s economy stagnates in Q4 (and Q3)
Newsflash: France has avoided falling into a technical recession, after stagnating in the last half of 2023.
Statistics body INSEE has got eurozone GDP day (details here) up and running by reporting that France’s economy was stable in October-December, with growth of 0.0%.
Trade supported the French economy, while its domestic economy struggled.
INSEE explains:
Final domestic demand (excluding inventories) contributed negatively to GDP growth this quarter (‑0.1 points after +0.4 points in Q3 2023), due to the decrease of gross fixed capital formation (GFCF, ‑0.7% after +0.2%) and of household consumption (‑0.1% after +0.5%).
Conversely, foreign trade recovered in Q4 2023 and contributed positively to GDP growth (+1.2 points after ‑0.1 points). Imports fell sharply (‑3.1% after ‑0.4%), while exports remained virtually unchanged (‑0.1% after ‑0.6%).
Finally, the contribution of inventory changes to GDP growth was negative again this quarter (‑1.1 points after ‑0.3 points in Q3 2023).
France’s GDP for the third quarter of 2023 has been revised up too, to show zero growth, not the 0.1% contraction previously reported.
Over 2023 as a whole, France’s economy grew by just 0.9%, down from 2.5% growth in 2022.
French GDP (Q/Q) Q4 P: 0.0% (est 0.0%; prev R 0.0%)
– GDP (Y/Y): 0.7% (est 0.7%; prev 0.6%)— LiveSquawk (@LiveSquawk) January 30, 2024
Key events
Charlotte de Montpellier, ING’s senior economist for France and Switzerland, says there are “few indicators” that suggest the French economy will pick up strongly in the first quarter of 2024.
In fact, we expect stagnation to persist. We expect the French economy to recover only gradually in the course of 2024, with growth picking up slightly in the second quarter and then accelerating in the second half of the year.
This recovery should take place thanks to more dynamic consumption against a backdrop of falling inflation and slightly improved purchasing power. Added to this will be the impact of a tight labour market. We expect growth to be even weaker in 2024 than in 2023, at 0.5% compared to 0.8%.
Back in the UK, the slowdown of grocery price inflation has stalled this month, according to data from data provider Kantar.
Kantar reports that supermarket prices were 6.8% more expensive than a year ago in January, slightly lower than the 6.9% drop in the year to December.
The Czech economy grew by 0.2% in the fourth quarter versus the previous three months.
That’s in line with expectations, and shows a return to growth after Czech GDP shrank by 0,6% in Q3.
On a year-on-year basis, the economy fell 0.2% in real terms, according to a flash estimate by the Czech Statistics Office.
Austria escapes recession
Over in Austria, the “downward trend in the domestic economy observed last year” was halted in the final few months of 2023, statistics body WIFO says.
WIFO reports that Austria’s economy grew by 0.2% in Q4 2023, better than the 0.2% contraction expected.
That follows two quarters of negative growth – -1.1% in Q2, and 0.5% in Q3 – meaning Austria has escaped a technical recession.
WIFO reports that Austria’s industrial economy expanded by 0.4% in Q4, while the services sector stagnated and construction shrank by 1%.
For 2023 as a whole, Austria’s economy shrank by 0.7%.
Spain’s economy minister, Carlos Cuerpo, has said the pick-up of growth in Q4 2023 is a good starting point for this year.
Reuters reports:
Economy Minister Carlos Cuerpo said that trend was expected to continue into 2024.
The fourth-quarter reading “provides a good starting point to meet our target of 2% growth in 2024,” Cuerpo said in a recorded video message.
Spain grows by 0.6%
Newsflash: Spain’s economy grew at a faster pace in the final quarter of 2024.
Spanish GDP expanded by 0.6% in the October-December quarter, up from growth of 0.4% in July-September.
That’s faster than the 0.2% growth forecast by economist, which may mean today’s eurozone GDP report is a little stronger than expected….
On an annual basis, Spain’s fourth-quarter economic output expanded by 2%, beating the average estimate of 1.5% in a Reuters poll.
🇪🇸 Spain Spanish GDP (QoQ) (Q4) $EUR
Actual: 0.6% 🟢
Expected: 0.2%
Previous: 0.4%— PiQ (@PiQSuite) January 30, 2024
🇪🇸 Spain Spanish GDP (YoY) (Q4) $EUR
Actual: 2.0% 🟢
Expected: 1.5%
Previous: 1.9%— PiQ (@PiQSuite) January 30, 2024
Here’s a chart showing French GDP over the last three years:
Here’s economist Julian Jessop on this morning’s French GDP report:
FYI, #France‘s economy stagnated in the second half of last year, with no growth in either the third or fourth quarters, though strong first half meant #GDP still up 0.9% in 2023 as a whole… 👇
(Digging deeper, French GDP did actually contract in both quarters, but only by…
— Julian Jessop (@julianHjessop) January 30, 2024
In the City, Diageo, the world’s top spirits maker, has missed first-half sales estimates this morning, following a sharp fall in demand in Latin America.
Diageo has reported that organic net sales fell by 0.6% in the second half of 2023, driven by a $310 million or 23% decline in the Latin America and Caribbean region.
Europe performed slightly better, with organic net sales growing 3%, primarily driven by double-digit growth in Turkey and high single-digit growth in Great Britain and Ireland (partly due to strong growth in Guinness).
Diageo’s brands also include Johnnie Walker, Tanqueray, Baileys, Smirnoff, Captain Morgan, Crown Royal and Don Julio.
Debra Crew, Diageo’s CEO, says:
The first half of fiscal 24 was challenging for Diageo and our sector, particularly as we lapped strong growth in the prior year and faced an uneven global consumer environment. Excluding LAC, our group organic net sales grew 2.5%, driven by good growth in Europe, Asia Pacific and Africa. While North America delivered sequential improvement in line with our expectations, we are focused on returning to high-quality share growth as consumer behaviour continues to normalise in our largest region.
As previously announced in November 2023, materially weaker performance in LAC, driven by fast-changing consumer sentiment and high inventory levels, significantly impacted total business performance.
HSBC fined 57 million pounds for deposit protection failures
Newsflash: The Bank of England has fined HSBC bank £57.4m for failing to protect some customer depositors for several years.
The BoE’s Prudential Regulation Authority said in a statement the bank failed to accurately identify deposits that were eligible for Britain’s Financial Services Compensation Scheme – which protects customer cash up to 85,000 pounds.
The failings occurred for HSBC Bank (HBEU) between 2015 and 2022, and for HSBC UK Bank between 2018 and 2021, says the PRA,
This is the second highest fine imposed by the PRA, which it says “reflects the seriousness of the failings.”
Sam Woods, Deputy Governor for Prudential Regulation and CEO of the PRA, said:
“The serious failings in this case go to the heart of the PRA’s safety and soundness objective. It is vital that all banks comply fully with our requirements around preparedness for resolution.
HBEU fell far short of its obligations in this area, and failed to disclose its failings to us in a timely manner. These failures led to today’s action, including the significant fine.”
The news that France’s economy failed to grow in the fourth quarter of 2023 comes as French farmers hold protests being dubbed the “siege of Paris.”
Farmers argue they are being hit by regulations, taxes and falling pay.
Yesterday, a tractor strike stopped traffic on eight main motorways into the capital, prompting the French government to warn farmers that any action to block access to Paris’s main market for fresh food would be crossing a red line.
President Emmanuel Macron held a crisis meeting with key cabinet ministers, on what was being called “Operation Paris Siege”. Prisca Thevenot, a government spokesperson, said announcements would be made on Tuesday. “The whole government and the president are mobilised,” she said.
France’s economy stagnates in Q4 (and Q3)
Newsflash: France has avoided falling into a technical recession, after stagnating in the last half of 2023.
Statistics body INSEE has got eurozone GDP day (details here) up and running by reporting that France’s economy was stable in October-December, with growth of 0.0%.
Trade supported the French economy, while its domestic economy struggled.
INSEE explains:
Final domestic demand (excluding inventories) contributed negatively to GDP growth this quarter (‑0.1 points after +0.4 points in Q3 2023), due to the decrease of gross fixed capital formation (GFCF, ‑0.7% after +0.2%) and of household consumption (‑0.1% after +0.5%).
Conversely, foreign trade recovered in Q4 2023 and contributed positively to GDP growth (+1.2 points after ‑0.1 points). Imports fell sharply (‑3.1% after ‑0.4%), while exports remained virtually unchanged (‑0.1% after ‑0.6%).
Finally, the contribution of inventory changes to GDP growth was negative again this quarter (‑1.1 points after ‑0.3 points in Q3 2023).
France’s GDP for the third quarter of 2023 has been revised up too, to show zero growth, not the 0.1% contraction previously reported.
Over 2023 as a whole, France’s economy grew by just 0.9%, down from 2.5% growth in 2022.
French GDP (Q/Q) Q4 P: 0.0% (est 0.0%; prev R 0.0%)
– GDP (Y/Y): 0.7% (est 0.7%; prev 0.6%)— LiveSquawk (@LiveSquawk) January 30, 2024
If it’s poor, today’s eurozone GDP data could prompt the European Central Bank into starting to cut interest rates this year, perhaps as early as April.
Michael Hewson, analyst at CMC Markets, explains:
The French economy is predicted to improve modestly to 0% in Q4 from -0.1% in Q3, however there is considerable downside risk to this estimate if recent PMI numbers are any guide.
In Italy the picture looks little better with a stagnation also expected, and a modest slowdown from 0.1% in Q3, while in Germany the economy is expected to be in recession with a -0.1% contraction in Q3 followed by a bigger -0.3% contraction in Q4.
The only silver lining is Spain where the economy is expected to grow by 0.2%, however that is unlikely to be enough to prevent the bloc sliding into a technical recession with another quarterly contraction of -0.1% following a similar contraction in Q3.
UK shop prices rise at slowest pace since May 2022
Inflation across UK shops has fallen to its lowest level since May 2022, as households benefitted from a slowdown in price rises of food and other goods.
Annual shop price annual inflation eased to 2.9% in January, new data from the British Retail Consortium and NielsenIQ show. That’s down from 4.3% in December, meaning prices are still rising, but at a slower rate.
Food inflation decelerated to 6.1% in January, down from 6.7% in December, helped by a fall in the price of tea and milk, Alcohol, though, remained more expensive than a year ago due to increased duties, the BRC says.
Fresh food inflation dropped to 4.9%, down from 5.4% in December, while non-food inflation eased to just 1.3% in January, down from 3.1% in December.
This may cheer the Bank of England, which is due to set UK interest rates at noon on Thursday.
Helen Dickinson, chief executive of the British Retail Consortium, said:
“Some New Year cheer as January shop price inflation slid to its lowest level since May 2022. Non-food goods drove the fall, as many retailers offered heavily discounted goods in their January sales to entice consumer spend amidst weak demand.
Good news for the morning brew as the price of tea and milk fell, while evening tipples remained more expensive on the back of increased alcohol duties.
⚠️ UK SHOP PRICES RISE AT SLOWEST PACE SINCE MAY 2022: BRC
Prices in British shops rose at the slowest annual pace since May 2022 this month, the British Retail Consortium (BRC) said on Tuesday, adding to signs of easing inflation pressures ahead of this week’s Bank of England…
— Seb (@Seb_TFX) January 30, 2024
Introduction: It’s eurozone GDP day
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
We get a major healthcheck on Europe’s economy this morning, as new GDP data for across the eurozone is released.
Growth figures for France, Germany, Italy, Spain, Austria and Portugal will be released over the next few hours, culminating in the first estimate of eurozone growth in the final quarter of 2023.
And it may show that the eurozone is in recession. Economists predict that GDP in the single-currency bloc shrank by 0.1% in Q4 2023. If so, that would be the second quarterly contraction in a row (GDP fell 0.1% in July-September), meeting the technical definition of a recession.
The eurozone economy has been weighed down by high interest rates, and the cost of living squeeze caused by the jump in energy and food prices after Russia’s invasion of Ukraine.
The euro weakened yesterday ahead of today’s data, as Tony Sycamore, market analyst at IG, explains:
EUR/USD is trading lower at 1.0832 (-0.18%) ahead of the EA flash GDP data, expected to show a second consecutive quarter of contraction (-0.1% exp) and confirm the Euro Area entered recession.
Also coming up today
In a busy morning for economic data, we’ll also learn if UK grocery inflation fell in the last month, and whether lenders approved more, or fewer, mortgages.
The US economy, which has been doing rather better than Europe, will also be in focus, with the latest JOLTS report into job vacancies, a consumer confidence report and a house price index.
We also get a healthcheck on the global economy, with the International Monetary Fund releasing an update to its world economic outlook this afternoon.
There will also be disruption on UK railways today, as members of the Aslef union at Southeastern, Southern/Gatwick Express, Great Northern, Thameslink and South Western Railway strike in an ongoing pay dispute.
The global macro event calendar is stocked over the next 24 hours. Just be mindful of trending themes and subsequent event risk.
My top watch: IMF world growth outlook; $MSFT and $GOOG earnings; Eurozone #GDP; Japan unemployment; US consumer confidence and job openings: pic.twitter.com/hAPM7r4j4t
— John Kicklighter (@JohnKicklighter) January 29, 2024
The agenda
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6.30am GMT: French GDP report for Q4 2023
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8am GMT: Kantar’s latest UK grocery inflation data
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8am GMT: Spanish GDP report for Q4 2023
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8am GMT: Austria’s GDP report for Q4 2023
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9am GMT: Germany’s GDP report for Q4 2023
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9am GMT: Italy’s GDP report for Q4 2023
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9.30am GMT: Portugal’s GDP report for Q4 2023
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9.30am GMT: UK mortgage approvals for December
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10am GMT: Eurozone GDP report for Q4 2023
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Noon GMT: Mexico’s GDP report for Q4 2023
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1pm GMT: IMF to publish its January World Economic Outlook Update
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2pm GMT: US house price index for November
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3pm GMT: Conference Board index of US Consumer Confidence
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3pm GMT: JOLTS survey of US job openings