Economy exits technical recession in Q4

Economic activity increased 0.2% in the fourth quarter on a seasonally adjusted quarter-on-quarter basis (Q3: -0.5% s.a. qoq), bouncing back from a technical recession. Q4's reading marked the best result since Q2 2022. On an annual basis, GDP contracted 1.3% in Q4, improving from the previous quarter's 1.6% decrease.

Household spending recorded flat growth in the fourth quarter, contrasting Q3's 1.2% contraction. Moreover, fixed investment bounced back from the previous quarter’s 1.6% decrease, growing 0.2% in Q4. Demand likely benefited from a two-year low in inflation at the tail end of 2023, as well as strong nominal wage growth. That said, public spending growth was the slowest since Q3 2023, expanding 0.3% (Q3: +0.6% s.a. qoq). On the external front, exports of goods and services deteriorated, contracting 0.2% in Q4 (Q3: +2.4% s.a. qoq). In addition, imports of goods and services declined 0.8% in Q4 (Q3: +1.2% s.a. qoq), marking the worst reading in three quarters.

Our Consensus is for the economy to post a robust seasonally adjusted quarter-on-quarter expansion in Q1 of this year but to tally no more than a moderate rebound in 2024 as a whole.

EIU analysts commented on the outlook: “There is little reason for much optimism in 2024, as the main drivers of growth are all likely to remain depressed. Monetary policy, both in Europe and in other major economies, will remain tight until the second half of next year, which will hamper credit growth […]. A poor industrial performance in Germany will affect Austria's manufacturing exports (as the two countries' industrial sectors are closely integrated). Overall GDP growth is likely to be weak.”

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