Europe courts technical recession as euro area GDP data is announced

Today the euro area, as well as European countries Germany, Spain and Italy, announced their latest GDP growth rate figures.

The region showed subdued growth for 2023 overall, buffeted by numerous headwinds, including its proximity to two major wars and punitively high interest rates throughout the area. Its GDP was pulled down by poor performance of bigger economies like Germany, but paradoxically held up by better-than-expected performances by smaller nations such as Spain and Italy.

Read more: European and UK PMIs signal “stubbornly higher” inflation

GDP flat but ‘stable’ according to EU

In the fourth quarter of 2023, seasonally adjusted GDP remained stable in both the euro area and the EU, compared with the previous quarter, according to a preliminary flash estimate published by Eurostat, the statistical office of the European Union. This was an improvement on the third quarter of 2023, GDP had declined by 0.1 percent in both zones.

Time for a technical recession?

Analysts estimated ahead of today’s euro area GDP announcement that the region’s economy would contract by 0.1 percent again this quarter, after figures of -0.1 percent for Q3 as well.

This would mean that the eurozone officially in a technical recession, having contracted by 0.1 percent for two consecutive quarters in Q3 and Q4, after achieving 0.2 percent growth in Q2 of 2023.

The biggest winner: Spain

First up was Spain, who reported the biggest surprise of the day. Spanish GDP grew by 0.6 percent in Q4 of 2023, 20 percent higher than 2023’s Q3 growth.

This pulled the entire 2023 annual GDP for Spain up to 2.5 percent growth, making it among the largest gainers on the continent for the year.

Depression for ‘GDP sachsen’

Germany, Europe’s largest economy, announced that GDP growth dropped 0.3 percent YoY, slightly more than market expectations, which had predicted a GDP growth rate of -0.2 percent prior to the announcement.

This meant that, for 2023 on the whole, Germany’s economy also contracted 0.2 percent (for the adjusted figures – unadjusted it’s closer to 0.4 percent), declining even further from December’s Q3 2023, in which it shrunk 0.1 percent.

Italy looks on the bright side

Italy, on the other hand, who reported their GDO figures at the same time, had better-than-expected news to share. QoQ, the country’s GDP grew by 0.2 percent, as opposed to the zero-growth forecast for it prior to the announcement, and the 0.1 percent growth it reported in Q3.

In terms of annual GDP, Italy was up an impressive 0.5 percent YoY in 2023, up substantially from 2022’s 0.1 percent, considering the economic circumstances of last year.