Eurostat, the European statistical office, revised down its GDP forecast for the euro area for the first quarter. He now estimates that the eurozone’s GDP has fallen by 0.1% (instead of the 0.1% growth in its original calculation). It can be said that the Eurozone economy has entered a technical recession by chaining the decline for two consecutive quarters (down 0.1% in the fourth quarter). What does this mean?
1. Germany sets the pace
The downward revision of eurozone growth is the direct result of the correction. Germany At the end of May, he made his own statistics. German statistics office Destatis, which originally forecast the German economy to recession in the first quarter (0.0%), published a downward revision on May 25 and now estimates that GDP fell by 0.3% between January and January. March, after recording a negative 0.5% rate in the fourth quarter of last year. The technical recession in the eurozone’s leading economy has ended, putting pressure on EMU statistics and enter a technical recessionAccording to data released today by Eurostat.
2. Is a crisis coming?
Beyond the technical concept of stagnation—a two-quarter fall in GDP—is understood when an economy is truly in recession. sustained decline in activity and employment. This was clearly what happened in the eurozone between 2000 and 1900. second quarter of 2008 and fourth quarter of 2009 corresponds to the global financial crisis. Also for the whole of 2020, with the Covid health crisis.
The economy in Spain started in the third quarter of 2008 and ended in 2008. double recession From where they left until the third quarter of 2013. It was only demolished at that time. 2.5 million jobs.
No body, institution or educational institution sees a real recession in the eurozone economy (even less in Spain); No permanent decline in activity or permanent job loss is expected. That same Wednesday, the OECD (before we knew the Eurostat revision) raised its eurozone economy forecast for 2023 by a tenth to 0.9%, keeping its 2024 forecast at 1.5%. they rule out the prediction of a real recession in the eurozoneAlthough they show a net slowdown compared to 3.5% in 2022.
not even in GermanyWhere the government expects the technical recession to be temporary and apparently without major macroeconomic impacts. SpainWith 0.4% in the fourth quarter of 2022 and 0.5% in the first quarter of 2023 (0.3% and 1.6% in the first quarter of 2023, at least for the time being), the country with the highest growth among the major euro economies stands out as. Portugal).
3. Recession or slowdown?
Technical recession or not, the reality is that in 2023 a general slowdown of all economies: the world economy, the eurozone, the main countries and also in Spain. The reason for this is that the incentives applied in 2022 are now withdrawn in 2023, the consequences of the war in Ukraine – the energy crisis and inflation -… The tightening of monetary policy with the increase in interest rates. – While contributing to the cooling of demand from families and companies in the world’s major economies, it has also begun to reduce the spending margins of governments. For Spain, the OECD forecasts the economy to grow 2.1% this year and 1.9% next year, after growing 5.5% in 2022.
4. Why did the data deteriorate?
Eurostat data shows a net deterioration in spending. home consumption In the euro area (-1% in the fourth quarter and -0.3% in the first quarter). They also show drops. public expenditure in the first quarter of the year (-1.6%), imports (-.3%) and exports (-0.1%). The good news is that workplace investments grows (0.6%); but first of all, job creation accelerated in the first quarter (up to 0.6%, more than double the previous period); The increase in hours worked also accelerated (up to 0.6%).
5. Why is household consumption falling?
High inflation is behind the loss of purchasing power of households and the consequent decline in consumption across the Eurozone. Moreover, the rise in interest rates helps to limit households’ spending on durable goods financed by bank loans.
6. Will the US go into recession too?
It’s very possible. According to the minutes of the Federal Reserve’s last meeting, released in May, Fed economists predict that the US economy could chain two consecutive quarters of GDP with negative rates in the last quarter of this year and the first quarter of next year. , this will cause it to fall technical recession. According to the Fed Chairman, Jerome Powell In any case, there will be a “light” recession, ie the increase in unemployment will be less than in other recessive periods.
7. Recession or ‘banana’?
The word, implicitly referred to as the ‘word starting with R’, has proven to have a negative impact on the expectations of economic actors. So much so that the weekly magazine The Economist “R-word index” (R word index) as an indirect way of measuring the degree of pessimism (or optimism) of economic units based on how many times the word ‘recession’ appears in the pages of The New York newspapers The Times and The Washington Post every three months. He called it the ‘R-word’ to avoid mentioning the unspeakable word as much as possible, the mere mention of it being cause for alarm and concern (so much so that an adviser to former President James Carter chose to say it jokingly). ‘banana’ instead of “stagnation”).