US, European GDP growth paths diverge markedly in 2023

Excluding the COVID-19 pandemic recession and recovery in 2020 and 2021, the gap between US and eurozone growth in 2023 was the widest since the eurozone sovereign debt crisis in 2013.

Official fourth quarter (Q4) of fiscal 2023 (FY23) GDP outturns showed ongoing US economic strength in stark contrast to stagnation in Europe. The UK and Germany posted quarterly contractions as weak domestic and foreign demand took their toll, and growth in the Eurozone as a whole was zero in Q4FY23.

The report says that the US economic growth surpassed expectations in Q4FY23 and grew by 0.8 per cent q-o-q (3.3 per cent q-o-q annualised), with private consumption being the main driver of the expansion. High-frequency indicators suggest the buoyancy of activity has carried over into Q1FY24. Consumer confidence rose in January to its highest level since December 2021 and sentiment indicators’ in the manufacturing sector also have increased in recent months. US equities have rallied strongly, with the S&P 500 index reaching its highest-ever levels.

UK GDP declined by 0.3 per cent q-o-q in Q4FY23, with private and public consumption and exports weighing on growth. Germany’s economy also contracted by 0.3 per cent q-o-q, as exports shrank on a quarterly basis for the fifth consecutive period. Despite that, eurozone GDP was flat, as Italy grew by 0.2 per cent q-o-q and Spain by 0.6 per cent q-o-q.

Fitch's bi-monthly ‘20/20 Vision’ chart pack covers the 20 major economies (the Fitch20) that are the focus of the Fitch Economics team's global macro analysis, and plots five years of high-frequency economic data for 20 variables, with consistent coverage across each country.

ALCHEMPro News Desk (RR)