EMU GDP Slows But Advances in Q4 2022

GDP in the European Monetary Union (EMU) settles in at a growth rate of 0.4% at an annual rate in the fourth quarter of 2022. This is a slowdown from the third quarter growth rate of 1.2% which itself was a slowed-down pace. GDP ends 2022 on a positive note with growth, but with a slowing trend. The fourth quarter growth rate for the monetary union slowed to 1.9% after reaching 2.3% in the third quarter, compared to 4.3% in the second quarter. The ranking of the year-over-year growth rate for the EMU (at 1.9%) is in its 56.5 percentile, leaving it slightly above its median result on data back to the fourth quarter of 1997.

Q4 GDP Seven members of the monetary union have provided estimates of GDP for the fourth quarter. They are Finland, France, Germany, Italy, the Netherlands, Portugal, and Spain. Among these reporters, Finland logs a decline in GDP in Q4 of 0.8% at an annual rate. Germany reports a decline of 1% at an annual rate; Italy reports a decline at 0.5% at an annual rate. Posting GDP increases in the fourth quarter are France, at a 0.5% annual rate, the Netherlands, at 2.5% at an annual rate, and Spain, at a 0.9% annual rate.

Q3 GDP In the third quarter, GDP declined in Finland and the Netherlands quarter-to-quarter while in the second quarter there had been no EMU country in the table reporting GDP declines quarter-to-quarter (U.S. GDP did decline).

Year-on-year GDP Looking at year-over-year results for Q4, all reporting countries have increases in GDP with France’s 0.5% the weakest gain followed by Finland's 0.6% gain. The strongest gain over four quarters is 3.3% for the Netherlands followed by Portugal's 3.1%. Note that outside the four largest economies, EMU GDP gains in Q4 for other members were 3.6%.

GDP trends Excepting the Netherlands, all countries report slower year-over-year growth in the fourth quarter than the third quarter and all countries reported slower growth in the third quarter compared to the second quarter. In the second quarter, all countries reported slower growth compared to the first quarter except for Spain. In broad terms, the European Monetary Union is showing a clear case of slowing growth. This is not surprising coming out of the recession and the initial boom in the wake of having dealt with COVID and the recovery from the impact of the pandemic.

The U.K. Elsewhere in Europe, the U.K. shows flat growth for the fourth quarter (Q/Q), an improvement from the decline that it had quarter-to-quarter in Q3 when GDP fell by 0.8%. The U.K. joins the rest of Europe showing decelerating year-on-year growth rates from the first quarter to the second to the third to the fourth. U.K. GDP growth in the fourth quarter of 2022 annualized is down to only 0.4% year-over-year.

Recovery favors the small... Recovery in the EMU has been stronger outside of the four largest economies. In the fourth quarter, the four largest economies grew 1.3% year-over-year compared to 1.9% for the EMU overall. In the third quarter, the four economies grew at a 2% pace while the EMU grew by 2.3%. In the second quarter, the four largest economies grew at a 3.9% pace compared to 4.3% overall for the whole of the monetary union and 5.7% for the EMU apart from the Big Four. In fact, while the four largest economies are slowing to 1.3% in the fourth quarter from 2.0% in the third quarter, the rest of EMU accelerates to 3.6% from 3.3%.

Rankings Rankings are for the period extending back to the fourth quarter of 1997. EMU shows a slightly better than median performance for its year-over-year growth rate in the fourth quarter at the 56.5 percentile, just slightly above its median marker at 50. Above-median growth appears for Italy, the Netherlands, and Portugal. Spain ranks just below its median at a growth standing of 48.9% while Finland, France, and Germany have very weak standings (of 29.3%, 16.3% and 40.2%, respectively).

Other rankings The U.K. has a growth standing in its 12th percentile. The U.S. is at its 14th percentile. Japan is at its 39.8 percentile. The EMU median ranking is at its 48.9 percentile and the four largest economies with growth pooled and GDP-weighted rank in their 41.3 percentile. It has been a tough row to hoe for the larger economies. Current performance is on a downswing with central banks hiking rates and some inflation metrics looking stubborn again after breaking lower for a short while. Policy and central banks face challenges ahead.