Eurostat has published its estimates for GDP growth in the EU as well as the euro area recently. According to the estimates, the EU GDP increased by 0.3% QoQ, and 0.5% YoY, while the euro area’s GDP increased by 0.3% QoQ, and 0.4% YoY. This would mean that in Q1 and at the current prices, the euro area GDP amounted to EUR 3.68tn, while the EU GDP amounted to EUR 4.35tn.
According to the latest report on the GDP released by Eurostat for Q1 2024, the euro area GDP grew by 0.3% QoQ, 0.4% YoY, while the EU GDP increased by 0.3% QoQ and 0.5% YoY.
Quarterly YoY GDP growth rates (Q1 2008 – Q1 2024, %)
Source: Eurostat, InterCapital Research
As compared to the United States, where GDP increased by 0.3% QoQ, and 2.9% YoY, we can see that the EU is lagging far behind, at least on a more important yearly basis. This can be attributed to several factors, including the higher inflation level and impact of the war in Ukraine on the EU (for example, in terms of energy prices), slower overall growth in the most developed economies of the Union, lower productivity & innovation as compared to the US, etc. Furthermore, the high interest rates held by the ECB are also slowing down growth, albeit the latest rate cut (-25 bps across key interest rates), could prove positive, although it would also make the EU less attractive for investments as compared to the US, due to US offering higher interest on its bonds as compared to the EU.
EU member countries GDP growth rate (Q1 2024, YoY, %)
Source: Eurostat, InterCapital Research
In terms of individual countries’ growth, Malta recorded the highest increase in Q1 YoY, growing by 4.6%, followed by Croatia at 3.9%, Cyprus at 3.4%, Lithuania at 2.9%, and Slovakia at 2.7%. On the other hand, Ireland recorded the largest decrease, a notable -5.9% YoY, followed by Estonia at -2.1%, Austria at -1.3%, Finland at -1.2%, and the Netherlands at -0.6%.
In terms of GDP components leading to the GDP change, household & NPISH final consumption expenditure grew by 1.1% YoY in Q1, government final consumption expenditure increased by 1.8%, gross fixed capital formation declined by 0.2%, exports decreased by 0.2%, while imports declined by 1%. As a result, household & NPISH final consumption expenditure contributed 0.6 p.p. to GDP growth, government final consumption expenditure increased by 0.4 p.p., gross fixed capital formation didn’t contribute anything (0.0 p.p.), changes in inventories led to a negative 0.9 p.p. contribution, decrease in exports to a negative 0.1 p.p. contribution, while a decrease in imports led to a positive 0.5 p.p. contribution.
As such, the euro area GDP amounted to EUR 3.68tn at the current prices, while the EU GDP amounted to EUR 4.35tn.
Overall, what this can show us is that while private consumption remains a key driver of GDP growth, it has been quite subdued, under the inflation of both elevated inflation and subsequently, higher interest rates. Government expenditure also continues to support GDP growth, although one shouldn’t rely too much on this as it usually has an inflationary effect. A drop in exports, on the other hand, is worrying but expected given the situation in some of the larger EU economies such as Germany, which are quite export-orientated. Finally, a decrease in imports can be seen as positive (at least for GDP growth) but it could also be a sign of more trade between member countries as opposed to the rest of the world, mostly due to sanctions on Russia and attempts at reduced reliance on other major economies such as China.
