From fifth to first

The worsening of the macro and financial environment in recent weeks is becoming increasingly noticeable in the indicators. To the confidence data, which were the first to collect the deterioration of the economic cycle, other indicators are beginning to be added that capture the economic reality of the moment.

Thus, for example, inflationary pressures are beginning to take their toll on household consumption. Even though in the second quarter of 2022 the recent reviews of the national accounts have shown a more favorable behavior than initially estimated (an example of this is the US and Germany), the truth is that the evolution of retail sales or personal spending begins to slow down its growth, if not to worsen its records in recent months (especially in the euro area). The reduction in orders expected for the coming months from the manufacturing industry is another confirmation of the containment of global demand that is already in sight for the second half of the year.

All these indicators, collected in the models that allow capturing the degree of quarterly progress of the economy, point to a third quarter with moderate growth in the US (0.9% quarterly), and even a cession in the euro area (-0.2% quarterly).

However, the resilience of the US in the third quarter will not be able to compensate for the poor first half of the year, which will inevitably translate into lower growth this year (1.5% annual). A considerable slowdown in activity, which had grown by 5.5% per year in 2021. Forecasts for 2023 are not very optimistic either, since the US GDP is expected to grow by close to 1% per year, that is, below its potential growth or, what is the same, without putting all the resources available to it into operation.

The euro area, for its part, although it will grow this year more than initially forecast (2.8% annually), will be due to inertia and a good first half of 2022, since the outlook for the last quarters of the year and the first of 2023 have deteriorated in recent weeks, being able to register a recession or null quarterly variation. In this way, the euro area will grow just 0.5% per year in 2023.

The comparison of these two blocks would be unfavorable for the euro area, expecting it to have a worse performance in the coming months than the US economy, as a result of the temporary extension of the war between Russia and Ukraine, the tensions in the prices of raw materials energy premiums and the vulnerability of its production structure to a supply cut of the latter (especially gas).