Economy in Brief

Only 38% of the countries in the table show inflation accelerating in December. Inflation is much more broadly decelerating right now. In November, the accelerating/decelerating split was even.

Inflation has been moving lower, but its breadth across these 14 countries is above 50% showing more acceleration than deceleration, over three months and six months. The 3-month diffusion rate is 61.5%, the 6-month diffusion is a very high 92.3%. Still, year-on-yar inflation is decelerating on balance just about everywhere with a diffusion score of 7.7%. Inflation over 12 months accelerates compared to 12-months before that only in Luxembourg, hardly a regional bellwether.

Moreover, despite what the diffusion data tell us, over three months prices are falling by more where they are falling compared to the speed of increases where they are rising. The seven country-level prices that showed inflation increase over three months averaged gains of 5.9% compared to the seven categories with prices declining that show the average decline of 8.8%. The medians also show this with the median gain where there are price rises at 4.7% vs. the median decline of 5% where there are declines. These statistics juxtapose breadth vs. the intensity of a directional move.

Over six months not only is the tendency to accelerate broader (92% of respondents) but where prices are rising the average gain is 12.5% compared to an average decline of 9.3% where prices are falling. And when we shift to explore the median statistic where there are prices rising, the median price rise is 2.6% compared to the median drop being 2.1% where prices are dropping.

Year-on-year 13 of 14 PPI price indexes, are both decelerating compared to a year ago and falling compared to their year-on-year pace. So, inflation trends and tendencies are becoming more mixed, over shorter horizons. But in the aggregate, inflation rates are moving into a lower trajectory.

GDP in the European Monetary Union in 2023 Q4 rose by 0.1% based on its early release. This small gain reverses the direction of GDP that fell by 0.5% in the third quarter of 2023. It helps to establish a positive growth rate over the last four quarters at 0.1%, after the third quarter posted a year-over-year GDP growth rate of zero.

EMU avoids year-on-year GDP losses- The European Monetary Union has avoided year-over-year declines in GDP since the first quarter of 2021. This early report is based in part on released data for seven monetary union members plus estimates. The four largest EMU economies: Germany, France, Italy, and Spain, posted a GDP gain, in the fourth quarter of 0.1% when grouped together. This is below the 0.3% gain they logged in the third quarter. These four countries provided a year-over-year GDP gain of 0.5%, up from 0.3% in the third quarter but lower than the previous two quarters. Based on this early data the rest of the monetary union -apart from these four countries - saw fourth quarter GDP rise by 0.3%, a reversal of their third quarter decline of 2.5% and it compares to a 0.1% quarter-to-quarter decline in the second quarter of 2023. The rest of the monetary union group’s GDP declined by 0.9% in the fourth quarter year-over-year the same as its year-over-year drop in the third quarter. These early and preliminary data demonstrate that the Big-4 economies in the monetary union are carrying the weight of pushing growth forward.

Optimism for global growth? However, none of this comes close to the U.S. where fourth quarter growth annualized GDP was up 3.3% after posting 4.9% in the third quarter. The U.S. GDP logs in at a 3.1% growth rate over four-quarters in 2023-Q4, up from 2.9% over four-quarters that was registered in the third quarter of 2023. The performance of the U.S. economy provides some backing and reason for optimism for the global economy looking ahead.

Percentile standings reveal a lot of under-performance- Additionally, we can evaluate the year-over-year GDP performance of the countries in the table by comparing current year-over-year growth to growth rates in the past. On this basis, the U.S. clearly has the strongest relative growth rate with the 75-percentile standing for its 3.1% growth rate. Portugal has a standing in its 64th percentile, above its historic median for the period (medians occur at the 50-percentiel mark). And Portugal is the only European Monetary Union member in the table with a GDP growth rate above its median. For the monetary union, the 0.1% growth in the fourth quarter has a 19.6 percentile standing. Among reporting members, the strongest standing (apart from Portugal) is Belgium with a 43.5 percentile standing, Italy with a 40.2 percentile standing, and Spain at a 38-percentile standing. The lowest standing is from Ireland with a 5.4 percentile standing; Germany has a 20-percentile standing and the French standing rounds to its 23rd percentile.

Ireland's economy is not doing particularly well; however, the consumer portion seems to be holding up better than expected. Nominal retail sales (excluding auto sales) in December rose by 0.8% while real (ex-auto) retail sales rose by 0.3%. The inflation adjusted series rose by 1.9% over 12 months, fell at a 3.3% annual rate over six months and rose at an annualized rate by 5.1% over three months.

The nominal figures get the most notice, but of course, we are mostly concerned with sales in real terms.

In real terms, Irish sales (excluding motor vehicles) are up at a 3.9% pace in 2023-Q4 (in the just completed quarter for retail sales data). Food & beverage spending is up at a 3.7% pace. Clothing & textile spending is falling at a 5.5% annual rate. Total retail sales volumes are falling at a 0.8% annual rate in the fourth quarter.