Euro Area

Euro Area Economic Forecast

Euro Area Economic Outlook

GDP dipped 0.1% quarter on quarter in Q3 on the back of worsening external demand and higher interest rates, swinging from Q2’s 0.2% expansion. Germany’s slight contraction amid on an ailing industrial sector weighed on the reading. The economy is set to stagnate in the current quarter, restrained by higher interest rates and waning savings. In October, the manufacturing PMI signaled a sharper decline, while the services sector was mired in contractionary territory for the third consecutive month. Additionally, economic sentiment soured in the same month, with consumer sentiment hitting a seven-month low. More positively, inflation dropped more than expected in October, which should give some breathing room to households. In politics, in November, the Spanish parliament backed a left-leaning government, while the socialist government fell in Portugal on a corruption scandal.

Euro Area Inflation

Harmonized inflation fell to 2.9% in October (September: 4.3%). Energy prices fell more sharply, while prices for services, non-energy industrial goods, and food, alcohol and tobacco rose more softly. Inflation should fall in 2024 versus 2023’s average on still-high interest rates and a higher base effect. A wage-price spiral and commodity price spikes are upside risks.

This chart displays Economic Growth (GDP, annual variation in %) for Euro Area from 2013 to 2022.

Euro Area Economic Data

2018 2019 2020 2021 2022
Population (million) 336 337 338 338 339
GDP (EUR bn) 11,600 11,987 11,467 12,417 13,424
GDP per capita (EUR) 34,523 35,575 33,964 36,779 39,645
Economic Growth (Nominal GDP, ann. var. %) 3.3 3.3 -4.3 8.3 8.1
Economic Growth (GDP, ann. var. %) 1.8 1.6 -6.2 5.9 3.4
Domestic Demand (ann. var. %) 1.8 2.6 -5.6 4.2 3.3
Private Consumption (ann. var. %) 1.5 1.4 -7.8 4.3 4.2
Government Consumption (ann. var. %) 1.0 1.8 1.0 4.2 1.6
Fixed Investment (ann. var. %) 3.2 6.5 -6.2 3.7 2.8
Exports (G&S, ann. var. %) 3.6 3.2 -9.3 11.3 7.3
Imports (G&S, ann. var. %) 3.8 5.0 -8.8 9.1 7.9
Industrial Production (ann. var. %) 0.8 -0.7 -7.7 8.9 2.3
Wages (ann. var. %) 2.5 2.5 3.3 1.1 4.3
Unemployment (% of active population, eop) 7.9 7.5 8.2 7.0 6.7
Unemployment (% of active population, aop) 8.2 7.6 8.0 7.7 6.7
Fiscal Balance (% of GDP) -0.4 -0.6 -7.1 -5.2 -3.6
Public Debt (% of GDP) 86.1 84.1 97.2 94.8 91.0
Money (ann. var. of M3 %) 4.2 4.9 12.3 7.0 3.8
Inflation (HICP, ann. var. %, eop) 1.5 1.3 -0.3 5.0 9.2
Inflation (HICP, ann. var. %, aop) 1.8 1.2 0.3 2.6 8.4
Inflation (PPI, ann. var. %, aop) 3.3 0.6 -2.6 12.3 34.3
ECB Refinancing Rate (%, eop) 0.00 0.00 0.00 0.00 2.50
ECB Overnight Deposit Rate (%, eop) -0.40 -0.50 -0.50 -0.50 2.00
3-Month EURIBOR (%, eop) -0.31 -0.38 -0.55 -0.57 2.13
10-Year Bond Yield (weighted avg. %, eop) 1.21 0.37 -0.09 0.28 3.00
Stock Market (Eurostoxx 50, var. %) -14.5 22.1 -3.6 21.8 -13.7
Exchange Rate (USD per EUR, eop) 1.14 1.12 1.22 1.14 1.07
Exchange Rate (USD per EUR, aop) 1.18 1.12 1.14 1.18 1.05
Current Account Balance (EUR bn) 341 297 197 343 -90
Current Account Balance (% of GDP) 2.9 2.5 1.7 2.8 -0.7
Merchandise Trade Balance (EUR bn) 271 298 333 277 -82
Foreign Direct Investment (EUR bn) 270.2 312.3 132.0 49.3 -

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