In this section we cover the preliminary flash estimate of European GDP for the 2nd quarter of 2024 (which is steady at a modest rate of +0.3% quarter-on-quarter) and the updated figures for business investment (which improved) and profitability (which fell sharply compared to Q4-23) for the 1st quarter of 2024.
European GDP, 2nd Quarter 2024: The initial estimate from Eurostat shows GDP growth of +0.3% for both the EU and the sub-set of the Euro-zone; this is the same pace as recorded in the previous quarter for both areas.
Compared to a year earlier, the EU economy has grown by +0.7% and the Euro-zone by +0.6%; this represents a slight acceleration to the annualized rate from the 1st quarter which was +0.6% for the EU and +0.5% for the Euro-zone.
There is only data for 13 of the EU Member States at this stage, with Germany (-0.1%), Hungary (-0.2%), Lativa (-1.1%) and Sweden (-0.8%) seeing their economy contract compared to the 1st quarter of 2024; in addition, Austria was unchanged. However, all of these countries had some growth in Q1-24 so none of them are in a recession.
Looking at the comparison with a year ago (at the end of Q2-2023), Germany (-0.1%), Ireland (-1.4%) and Latvia (-0.4%) are smaller now. It is worth noting that GDP data for Ireland is unreliable because of the significant contribution of headquarters operations for a number of large multi-national companies to economic activity which is measured with GDP.
You can get the Eurostat figures from their website at https://ec.europa.eu/eurostat/web/main/news/euro-indicators (30 July) or request it from MTA.
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European Investment & Profitability, 1st Quarter 2024: Eurostat has updated its figures on investment and profitability for the Euro-zone and released the estimate for the whole of the EU.
The investment rate for non-financial corporations in the Euro-zone improved from 21.9% in the 4th quarter of 2023 to 22.2% at the start of 2024; for the EU it rose from 22.3% to 22.7% on the same comparison. The improvement in the investment rate was because business gross fixed capital formation grew more rapidly than gross value-added in both the EU and the Euro-zone.
The gross investment rate of non-financial corporations is defined as gross fixed capital formation divided by gross value added – this ratio relates investment in fixed assets (buildings, machinery etc.) to the value added created during the production process. This series can be distorted by imports of intellectual property products reflecting the impact of globalisation.
In contrast, the profit share of non-financial corporations in the Euro-zone fell sharply to 39.5% compared to 40.2% in the last period of 2023; there was a similar change in the EU from 40.7% to 39.9%. In both cases, this is the lowest level since the 2nd quarter of 2020 at the height of the initial Covid outbreak.
The profit share of non-financial corporations is defined as gross operating surplus divided by gross value added. This shows the share of the value added created during the production process remunerating capital and it is the complement of the share of wage costs (plus other taxes minus other subsidies on production) in value added. The lower level of business profit share in the 1st quarter of 2024 is explained by the increase in business compensation of employees (wages and social contributions) plus taxes less subsidies on production being at a faster rate than the growth in gross value added.
You can get the full details from the Eurostat News Release which can be downloaded from their website at https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Quarterly_sector_accounts_-_non-financial_corporations (open the full article by clicking on the + sign where indicated towards the bottom of the page) or request it from MTA.