Economic developments

GDP decreases in the euro area and increases in the EU

Source: Eurostat (namq_10_GDP) and OECD.

Evolution of GDP

In the first quarter of 2023, seasonally adjusted GDP decreased by 0.1% in the euro area and increased by 0.1% in the EU. In the fourth quarter of 2022, GDP decreased by 0.1% and by 0.2% respectively.

For the euro area this is the second consecutive quarterly contraction of GDP, which means that the euro area economy is in a technical recession. However, this recession is unusual for two main reasons. Firstly, it is not diffused among the largest euro area economies as it has only been recorded in Germany. Secondly, the magnitude of the negative growth rates is relatively small compared to those observed in previous recessions.

Industrial production rebounds

Source: Eurostat (sts_inpr_m)

Industrial production

In April 2023, seasonally adjusted industrial production increased by 1.0% in the euro area and by 0.7% in the EU compared to the previous month. In March, industrial production decreased by 3.8% in the euro area and by 3.2% in the EU.

Production in construction declines

Source: Eurostat (sts_copr_m).

Production in construction

In March 2023, seasonally adjusted production in construction decreased by 2.4% in the euro area and by 1.9% in the EU compared to the previous month. In February, production in construction rose by 1.7% in the euro area and by 1.4% in the EU.

Retail trade remains stable in the euro area and increases in the EU

Source: Eurostat (sts_trtu_m)

Retail trade

In April 2023, the seasonally adjusted volume of retail trade remained unchanged in the euro area and increased by 0.1% in the EU compared to the previous month. In March, the retail trade volume decreased by 0.4% in the euro area and by 0.5% in the EU.

Annual inflation decelerates

Source: Eurostat (prc_hicp_manr) and OECD.

Source: Eurostat (prc_hicp_manr) and OECD

Inflation

In May 2023, inflation decelerated in both the euro area and the EU. Euro area annual inflation was 6.1% in May, down from 7.0% in April, while it was 7.1% in the EU in May, down from 8.1% in April.

Total unemployment decreases

Source: Eurostat (une_rt_m) and OECD

Total unemployment

In April 2023, the euro area seasonally adjusted unemployment rate was 6.5%, down from 6.6% in March 2023. The EU unemployment rate was at 6.0% in April 2023, stable compared to the previous two months.

Youth unemployment decreases

Source: Eurostat (une_rt_m) and OECD

Youth unemployment

In April 2023, the youth unemployment rate was 13.9% in the euro area and 13.8% in the EU, down from 14.0% in the previous month.

Economic sentiment drops

Source: Eurostat/DG ECFIN (ei_bssi_m_r2).

Economic sentiment indicator

In May 2023, the Economic Sentiment Indicator decreased by 2.5 points to 96.5 in the euro area and by 1.9 to 95.2 in the EU. The latest developments resulted from lower confidence in industry, services and, particularly, retail trade. Construction confidence remained broadly unchanged, while consumer confidence continued to recover, albeit at a reduced pace.

Employment expectations diminish

Source: Eurostat/DG ECFIN (ei_bsee_m_r2).

Employment expectations indicator

In May 2023, the Employment Expectations Indicator decreased due to less optimistic employment plans among services and industry managers and, to a lesser extent, construction managers. In May 2023, the indicator was 104.7 in the euro area and 104.0 in the EU.

Growth assessment

€-coin declines

Source: Bank of Italy/CEPR and Eurostat (namq_10_GDP)

€-coin

The €-coin decreased (from -0.15 in April to -0.42 in May), according to the latest release of the National Bank of Italy on 31 May 2023. This development reflects the decline in industrial production and in the qualitative indicators regarding business activity.

The Business Climate Indicator falls

Source: Eurostat/DG ECFIN (ei_bsci_m_r2)

Business Climate Indicator (BCI)

The Business Climate Indicator (BCI) for the euro area fell to 0.2 in May 2023.

GCCI signals a slowdown, and BCCI shows no signs of a recession

Source: Eurostat (own calculations).

Coincident indicators

The growth cycle coincident indicator (GCCI) was 0.95 in May 2023, indicating a slowdown phase for the euro area economy. In the same month, the business cycle coincident indicator (BCCI) was 0.01, confirming the absence of any recessionary signals for the euro area economy.

GCCI and BCCI are synthetic indicators, which are experimental in nature and calculated for the Business Cycle Clock by Eurostat. GCCI provides the probability of a slowdown in the economy and signals the peaks and troughs of the growth cycle, while BCCI provides the probability of a recession and signals the peaks and troughs of the business cycle. The probability is given on a scale from 0 to 1.

Read more about the methodology in the Statistics Explained article about the Business Cycle Clock.

DZ BANK’s Euro-indicator decreases

Source: DZ Bank Research

DZ BANK’s Euro-Indicator

The DZ BANK’s Euro-Indicator decreases month-on-month by 0.8% to 95.4 points in May 2023. The year-on-year rate was at -3.5% and thus the Euro-Indicator was lower than in the same month of the previous year.

Euro area economy continues to show resilience

Forecasts for the euro area's GDP growth and inflation for 2023 and 2024
	Forecast	GDP growth		Inflation
	Forecast	2023	2024	2023.	2024.
European Commission -	Winter 2023	0.9	1.5	5.6	2.5
Economic forecasts	Spring 2023	1.1	1.6	5.8	2.8
IMF -	January 2023	0.7	1.6	5.7	3.3
World Economic Outlook	April 2023	0.8	1.4	5.3	2.9
OECD -	March 2023	0.8	1.5	6.2	3.0
Economic Outlook Forecasts	June 2023	0.9	1.5	5.8	3.2
ECB -	March 2023	1.0	1.6	5.3	2.9
Macroeconomic Projections	June 2023	0.9	1.5	5.4	3.0
Sources: EC Economic Forecast: Spring 2023, Winter 2023, IMF World Economic Outlook: April 2023, January 2023, OECD Economic Outlook: June 2023, March 2023, ECB Macroeconomic Projections: June 2023, March 2023

Forecasts for the euro area Member States' GDP growth for 2023
	European Commission		IMF		OECD		ECB
	Winter 2023	Spring 2023	Jan. 2023	April 2023	March 2023	June 2023	March 2022	June 2023
Euro area	0.9	1.1	0.7	0.8	0.8	0.9	1.0	0.9
Belgium	0.8	1.2	:	0.7	:	0.9	:	:
Germany	0.2	0.2	0.1	−0.1	0.3	0.0	:	:
Estonia	0.1	−0.4	:	−1.2	:	−1.3	:	:
Ireland	4.9	5.5	:	5.6	:	4.4	:	:
Greece	1.2	2.4	:	2.6	:	2.2	:	:
Spain	1.4	1.9	1.1	1.5	1.7	2.1	:	:
France	0.6	0.7	0.7	0.7	0.7	0.8	:	:
Croatia	1.2	1.6	:	1.7	:	:	:	:
Italy	0.8	1.2	0.6	0.7	0.6	1.2	:	:
Cyprus	1.6	2.3	:	2.5	:	:	:	:
Latvia	0.1	1.4	:	0.4	:	1.1	:	:
Lithuania	0.3	0.5	:	−0.3	:	0.0	:	:
Luxembourg	1.7	1.6	:	1.1	:	0.8	:	:
Malta	3.1	3.9	:	3.5	:	:	:	:
Netherlands	0.9	1.8	:	1.0	:	0.9	:	:
Austria	0.5	0.4	:	0.4	:	0.2	:	:
Portugal	1.0	2.4	:	1.0	:	2.5	:	:
Slovenia	1.0	1.2	:	1.6	:	1.5	:	:
Slovakia	1.5	1.7	:	1.3	:	1.3	:	:
Finland	0.2	0.2	:	0.0	:	0.0	:	:
Sources: See first table

Forecasts for the euro area Member States' inflation for 2023
	European Commission		IMF		OECD		ECB
	Winter 2023	Spring 2023	Jan. 2023	April 2023	March 2023	June 2023	March 2022	June 2023
Euro area	5.6	5.8	5.7	5.3	6.2	5.8	5.3	5.4
Belgium	4.3	3.4	:	:	:	:	:	:
Germany	6.3	6.8	:	:	6.7	6.3	:	:
Estonia	6.2	9.2	:	:	:	:	:	:
Ireland	4.4	4.6	:	:	:	:	:	:
Greece	4.5	4.2	:	:	:	:	:	:
Spain	4.4	4.0	:	:	4.2	3.9	:	:
France	5.2	5.5	:	:	5.5	6.1	:	:
Croatia	6.5	6.9	:	:	:	:	:	:
Italy	6.1	6.1	:	:	6.7	6.4	:	:
Cyprus	4.0	3.8	:	:	:	:	:	:
Latvia	7.9	9.3	:	:	:	:	:	:
Lithuania	8.7	9.2	:	:	:	:	:	:
Luxembourg	3.1	3.2	:	:	:	:	:	:
Malta	4.3	5.4	:	:	:	:	:	:
Netherlands	4.5	4.9	:	:	:	:	:	:
Austria	6.6	7.1	:	:	:	:	:	:
Portugal	5.4	5.1	:	:	:	:	:	:
Slovenia	6.1	7.0	:	:	:	:	:	:
Slovakia	9.7	10.9	:	:	:	:	:	:
Finland	4.2	4.8	:	:	:	:	:	:
Sources: See first table

Forecasts for the euro area's GDP growth and inflation for 2023 and 2024
	Forecast	GDP growth		Inflation
	Forecast	2023	2024	2023.	2024.
European Commission -	Winter 2023	0.9	1.5	5.6	2.5
Economic forecasts	Spring 2023	1.1	1.6	5.8	2.8
IMF -	January 2023	0.7	1.6	5.7	3.3
World Economic Outlook	April 2023	0.8	1.4	5.3	2.9
OECD -	March 2023	0.8	1.5	6.2	3.0
Economic Outlook Forecasts	June 2023	0.9	1.5	5.8	3.2
ECB -	March 2023	1.0	1.6	5.3	2.9
Macroeconomic Projections	June 2023	0.9	1.5	5.4	3.0
Sources: EC Economic Forecast: Spring 2023, Winter 2023, IMF World Economic Outlook: April 2023, January 2023, OECD Economic Outlook: June 2023, March 2023, ECB Macroeconomic Projections: June 2023, March 2023

Forecasts for the euro area Member States' GDP growth for 2023
	European Commission		IMF		OECD		ECB
	Winter 2023	Spring 2023	Jan. 2023	April 2023	March 2023	June 2023	March 2022	June 2023
Euro area	0.9	1.1	0.7	0.8	0.8	0.9	1.0	0.9
Belgium	0.8	1.2	:	0.7	:	0.9	:	:
Germany	0.2	0.2	0.1	−0.1	0.3	0.0	:	:
Estonia	0.1	−0.4	:	−1.2	:	−1.3	:	:
Ireland	4.9	5.5	:	5.6	:	4.4	:	:
Greece	1.2	2.4	:	2.6	:	2.2	:	:
Spain	1.4	1.9	1.1	1.5	1.7	2.1	:	:
France	0.6	0.7	0.7	0.7	0.7	0.8	:	:
Croatia	1.2	1.6	:	1.7	:	:	:	:
Italy	0.8	1.2	0.6	0.7	0.6	1.2	:	:
Cyprus	1.6	2.3	:	2.5	:	:	:	:
Latvia	0.1	1.4	:	0.4	:	1.1	:	:
Lithuania	0.3	0.5	:	−0.3	:	0.0	:	:
Luxembourg	1.7	1.6	:	1.1	:	0.8	:	:
Malta	3.1	3.9	:	3.5	:	:	:	:
Netherlands	0.9	1.8	:	1.0	:	0.9	:	:
Austria	0.5	0.4	:	0.4	:	0.2	:	:
Portugal	1.0	2.4	:	1.0	:	2.5	:	:
Slovenia	1.0	1.2	:	1.6	:	1.5	:	:
Slovakia	1.5	1.7	:	1.3	:	1.3	:	:
Finland	0.2	0.2	:	0.0	:	0.0	:	:
Sources: See first table

Forecasts for the euro area Member States' inflation for 2023
	European Commission		IMF		OECD		ECB
	Winter 2023	Spring 2023	Jan. 2023	April 2023	March 2023	June 2023	March 2022	June 2023
Euro area	5.6	5.8	5.7	5.3	6.2	5.8	5.3	5.4
Belgium	4.3	3.4	:	:	:	:	:	:
Germany	6.3	6.8	:	:	6.7	6.3	:	:
Estonia	6.2	9.2	:	:	:	:	:	:
Ireland	4.4	4.6	:	:	:	:	:	:
Greece	4.5	4.2	:	:	:	:	:	:
Spain	4.4	4.0	:	:	4.2	3.9	:	:
France	5.2	5.5	:	:	5.5	6.1	:	:
Croatia	6.5	6.9	:	:	:	:	:	:
Italy	6.1	6.1	:	:	6.7	6.4	:	:
Cyprus	4.0	3.8	:	:	:	:	:	:
Latvia	7.9	9.3	:	:	:	:	:	:
Lithuania	8.7	9.2	:	:	:	:	:	:
Luxembourg	3.1	3.2	:	:	:	:	:	:
Malta	4.3	5.4	:	:	:	:	:	:
Netherlands	4.5	4.9	:	:	:	:	:	:
Austria	6.6	7.1	:	:	:	:	:	:
Portugal	5.4	5.1	:	:	:	:	:	:
Slovenia	6.1	7.0	:	:	:	:	:	:
Slovakia	9.7	10.9	:	:	:	:	:	:
Finland	4.2	4.8	:	:	:	:	:	:
Sources: See first table

Latest macroeconomic forecasts

European Commission: In the Spring 2023 Forecast GDP growth was revised up to 1.1% in 2023 and to 1.6% in 2024 in the euro area. Annual inflation was projected to decelerate to 5.8% in 2023 and to 2.8% in 2024, respectively 0.2% and 0.3% higher compared to the previous forecast. The European economy continues to show resilience in a challenging global context. At the time of the Winter interim Forecast, the EU economy was estimated to have broadly stagnated in the last quarter of 2022, while tumbling energy prices suggested that it would avoid a contraction of activity also in the first quarter of 2023. The latest estimates show that economic activity has even managed a small expansion in the first quarter of this year. A strong labour market has been an important element of resilience.

IMF: In the World Economic Outlook of April 2023, GDP is projected to expand by 0.8% in 2023 and by 1.4% in 2024 in the euro area, with a 0.1 percentage point upward revision to the forecast for 2023. Annual inflation is projected to 5.3% in 2023 and to 2.9% in 2024. The outlook is uncertain again amid financial sector turmoil, high inflation, ongoing effects of Russia’s war of aggression against Ukraine, and three years of COVID-19.

OECD (*): In the Economic Outlook of June 2023, growth is projected to remain at a below-trend rate in 2023 and 2024. Real GDP growth was projected at 0.9% in 2023 and at 1.5% in 2024. Annual inflation was forecasted at 5.8% in 2023 and at 3.2% in 2024. Lower energy and food prices will help reduce headline inflation in 2023; however, core inflation will remain elevated. Risks remain tilted to the downside as another spike in energy prices could reignite the energy crisis, and restrictive monetary policy could expose existing financial sector vulnerabilities. Persistent inflation, declining incomes and elevated uncertainty following recent turmoil in the banking sector call for coordinated and resolute policy actions.

(*) The euro area aggregate (EA) includes only OECD member countries. Croatia, Cyprus and Malta are excluded as they are not members of the OECD.

ECB: The ECB staff Macroeconomic Projections were finalised end of May 2023. Despite tightening financing conditions, the euro area economy was projected at 0.9% in 2023 and 1.5% in 2024. Compared with the March 2023 projections, real GDP growth has been revised down by 0.1 percentage points for 2023 and 2024. Inflation should continue to fall during 2023, driven by declines in energy and food inflation. As cost pressures fade and the ECB’s monetary policy measures gradually take effect, inflation should decline from 5.4% in 2023 to 3.0% in 2024.

Trend-cycle estimates

Column

Euro area GDP

Source: Eurostat (own calculations), see methodological note.

Euro area IPI

Source: Eurostat (own calculations), see methodological note.

Euro area employment

Source: Eurostat (own calculations), see methodological note.

EU GDP

Source: Eurostat (own calculations), see methodological note.

EU IPI

Source: Eurostat (own calculations), see methodological note.

EU employment

Source: Eurostat (own calculations), see methodological note.