The global economy remained on a moderate growth path at the beginning of the year, and the regional disparities between the advanced economies narrowed somewhat. Economic output in the euro area and the United Kingdom, which had continued to decline in the previous quarter, rebounded markedly. By contrast, the previously strong economic growth in the United States weakened. Japan even saw its aggregate output decline. China’s economic activity gained in strength, partly as a result of economic policy support measures. 

Survey results point to global economic activity increasingly gathering pace in the spring. According to surveys of purchasing managers, business conditions around the world have improved markedly in recent months. Industrial activity in the emerging market economies continued to gather momentum. By contrast, industrial output remained weak in the advanced economies, where the services sector was the main contributor to improved sentiment. In view of persistently high inflation in the services sector, this greater optimism is probably due to rising demand (see the supplementary information on the drivers of the recent recovery of sentiment in the advanced economies). This points to a strengthening of the economic upswing in the advanced economies. 

In line with the more favourable picture painted by the indicators, the staff of the International Monetary Fund (IMF) is now forecasting a somewhat more favourable outlook for the global economy in 2024 than before. In its April World Economic Outlook, the IMF raised its forecast for global economic growth slightly to 3.2% for 2024. 1 It left its forecast for 2025 at 3.2%. The IMF staff expect a gradual acceleration of growth in the advanced economies over time, due, not least, to the further decline in inflation over the forecast horizon. According to the IMF, inflation rates in most advanced economies could already come very close to target by the second quarter of 2025. It now considers the risk profile for the inflation outlook to be balanced. Although there is a chance of a swifter fall in inflation due to stronger compression of profit margins, there is also the risk of rising commodity prices as a result of escalating geopolitical conflicts.

Numerous commodity prices have already risen again in recent months. The price for a barrel of Brent crude oil increased from US$80 in January to US$90 in April. Prices were propped up by a somewhat brighter demand outlook and renewed production cuts by some OPEC countries and their partners. The International Energy Agency’s latest forecast now assumes that the global oil market will be undersupplied this year. 2 In addition, crude oil prices were influenced by the geopolitical conflict in the Middle East. Given somewhat reduced tensions of late, the price for a barrel fell to US$83 in the first half of May. By contrast, European gas prices have been growing steadily since February 2024. Many industrial raw materials, such as copper, aluminium and nickel, have also recently risen in price. Similarly, a number of food prices have increased slightly.

The disinflation process has recently faltered. Since January, the rise in consumer prices in the advanced economies has continued almost unabated. At 3.0 % in April, the annual rate was only marginally below the level recorded for January, not least because of higher energy prices. Meanwhile, the core inflation rate (from which energy and food prices are stripped out) saw a somewhat larger decline, but was still high at 3.4%. The robust wage growth in many places and the recent pick-up in demand could stall the ongoing process of disinflation.

In China, economic activity strengthened at the beginning of the year. According to the official estimate, GDP rose by 1.6% on the quarter after price and seasonal adjustment. The year-on-year increase amounted to 5.3%. This acceleration in growth was triggered not least by economic policy stimuli, including a significant increase in infrastructure investment. In addition, goods exports increased, probably also as a result of price concessions made by Chinese firms. By contrast, the renewed weakness in retail sales is pointing to a continuation of the subdued developments in private consumption. 

However, GDP growth may lose steam again soon. According to the latest indicators, consumer demand is likely to have remained subdued until recently. This is in line with the continued subdued development of consumer prices, which were only 0.3% higher in April than a year earlier. The core inflation rate stood at 0.7%. In addition, there are still no signs of a sustainable solution to the problems in the real estate market. Prices continued to fall in the vast majority of cities, while construction beginnings in the past quarter fell to their lowest level in almost 20 years.

The Indian economy is likely to have continued its vigorous expansion. Last year, India's real GDP grew by nearly 8%. Since then, the economy is likely to have remained on a steep growth path. This is suggested, for example, by the increase in industrial output and the persistent optimism in the services sector. Consumer confidence has also continued to improve in recent months. This was probably due, not least, to the marked decline in inflation. The inflation rate, measured in terms of the annual change in the consumer price index (CPI), stood at 4.8% in April, thus remaining in the upper range of the central bank’s target corridor. The central bank left its policy rate unchanged at 6.5%.

In Brazil, the economy may have picked up somewhat recently. Industrial output increased slightly in the first quarter compared with the previous quarter. The services sector also appears to have shown some improvement of late. All in all, there are growing signs that the Brazilian economy may have recently returned to a flat upward path, after stagnating in the second half of 2023. Meanwhile, the rise in consumer prices continued to decelerate. In April, inflation stood at 3.7%. Since the beginning of the year, the central bank has reduced its policy rate by a total of 125 basis points to 10.5%. 

The Russian economy is likely to have continued to expand strongly at the beginning of the year despite supply-side bottlenecks. In addition to the sharp increase in expenditure on armaments, buoyant consumption activity also supported growth. The shortage of intermediate goods experienced in the first months of the war is probably largely over and no longer significantly hampering output. Goods sanctioned by Western countries were predominantly transported to Russia via China and other neighbouring countries. By contrast, there were major bottlenecks in the Russian labour market. With an extremely low unemployment rate of 2.7%, labour shortages were reflected in robust wage growth. Against this backdrop, consumer price inflation increased slightly to 7.7% in March. Nevertheless, the central bank kept its policy rate at 16%.

In the United States, economic growth saw a marked decline at the beginning of the year. According to the preliminary estimate, real GDP increased by 0.4% after seasonal adjustment compared with the previous period. Following strong growth in the second half of 2023, this constitutes a marked slowdown. It was driven by substantial imports and a negative contribution from inventory changes. Likewise, government demand, which was a key pillar of the upswing in the previous year, increased only slightly. By contrast, private domestic demand remained robust. Private consumption rose markedly, supported by high employment growth and rising real incomes. Industrial investment also increased distinctly despite tight financing conditions. Housing investment even expanded considerably. 

With domestic activity remaining robust, the decline in inflation faltered. The annual rate of inflation as measured by the consumer price index was 3.4% in April, and thus 0.3 percentage point above the rate recorded for January. The main reason for this was an accelerated rise in energy prices. Meanwhile, the core rate fell noticeably, but was still high at 3.6%. The rise in prices for services slowed only slightly. The US Federal Reserve left its policy rate unchanged.

Japan’s economic output declined at the start of the year. According to initial estimates, GDP declined by 0.5% in seasonally and price-adjusted terms compared with the fourth quarter. The contraction was driven mainly by an automobile manufacturer halting production due to safety defects in its products. As a result, seasonally adjusted motor vehicle production was down by 17% on the previous quarter. Exports accordingly fell sharply and imports also dropped off significantly. The downturn also affected private gross fixed capital formation and private consumption. Despite the weak macroeconomic developments, which have persisted for some time now, the labour market situation remained favourable. The unemployment rate rose only slightly to 2.6%. Consumer prices rose by 2.7% on the year in March – excluding energy and food, by 2.2%. In the same month, persistently high inflation prompted the Bank of Japan to raise its policy rate for the first time in 17 years and end its control of the yield curve.

In the United Kingdom, economic output improved considerably in the first quarter. Initial estimates show that real GDP increased by 0.6% compared with the preceding period after seasonal adjustment. Manufacturing, in particular, expanded robustly, following clear losses in the final quarter of 2023. The long-suffering services sector also saw marked improvement. By contrast, construction activity fell significantly again. Overall, there are growing signs that the macroeconomic slowdown may have been overcome. By contrast, the labour market situation deteriorated somewhat recently. The unemployment rate rose to 4.3%. Nonetheless, year-on-year wage growth remained comparatively high at 5.7%. Consumer price inflation dropped somewhat, but remained significantly above the monetary policy target. The Harmonised Index of Consumer Prices (HICP) rose by 3.2% on the year in March. Inflation remained persistent, especially in the services sector. As a result, the core rate was still high at 4.2%. Against this backdrop, the Bank of England kept its policy rate unchanged.

Economic activity in Poland picked up in the first quarter. Seasonally adjusted real GDP rose by 0.4%, following a previous mild contraction. Private consumption is likely to have been the driving force behind this growth. Retail sales increased markedly, for example. Increases in households’ purchasing power are likely to have contributed here, as wages rose strongly amidst falling inflation. Gross wages grew substantially in March, up 12% on the year. The raising of the minimum wage by just under 18% at the start of the year also played a role. The unemployment rate continued to hover at its previous low. Annual consumer price inflation slowed to 2% in March but increased slightly to 2.4% in April. It was thus within the monetary policy target corridor. The core rate also fell, but was, at 4.1 %, still significantly higher than the headline rate. The National Bank of Poland left its policy rate unchanged at 5.75%.

The euro area economy expanded with surprising vigour in the first quarter of 2024. According to Eurostat’s flash estimate, euro area GDP increased by 0.3% in price and seasonally adjusted terms compared with the previous quarter, following a slight decline in the final quarter of 2023. This marked growth is likely to be mainly attributable to the improvement in economic activity in various services sectors and to the boost in the construction sector caused by favourable weather conditions. By contrast, the slowdown in manufacturing continued. In the current quarter, the underlying economic trend is likely to remain moderately upward. The burdens caused by the sharp price increases in recent years are diminishing further, and the global economy is providing a supportive stimulus. However, various hindering factors remain, in particular high geopolitical uncertainty and a tighter monetary policy stance. 

The gradual recovery in private consumption continued in the first quarter. Real disposable income is likely to have increased markedly in light of the good labour market situation, the significant rise in wages and weaker inflation. This is likely to have been reflected more strongly in demand for services. In any case, sales in the hotel and restaurant sector increased markedly in January and February in price-adjusted terms. Consumption of goods also recovered. After several quarters of very weak dynamics, retail sales rose noticeably in price-adjusted terms. However, the number of new motor vehicle registrations declined once again. At the same time, consumer confidence remained below its long-term average, despite some improvement over the quarter. Overall, private consumption remained subdued.

The increase in investment was probably only temporary. 3 The fairly strong increase in construction output in January and February suggests an increase in construction investment in the first quarter. However, this is likely to be due to temporary effects, particularly public infrastructure measures and the exceptionally mild weather. Fundamentally, the situation in the construction sector remains difficult. According to surveys, construction orders continued to decline and the number of building permits for residential buildings also dropped markedly again until January. Investment in machinery and equipment probably went down again. Capital goods producers’ domestic sales decreased considerably in January and February after price adjustment. By contrast, investment in information and communication technologies and intellectual property is likely to have expanded further owing to the trend towards digitalisation.

Exports of goods to third countries probably increased significantly at the beginning of the year. Exports of intermediate and consumer goods rose in particular. Considered by country, exports to China, in particular, are likely to have recovered significantly, after having fallen sharply in the previous three quarters. Exports to the United States and the United Kingdom probably also increased markedly. According to balance of payments data, euro area services exports rose strongly until February, probably largely driven by buoyant tourism business. By contrast, imports of goods from third countries are likely to have declined in the first quarter, with broad weakness across product classes.

The slowdown in the manufacturing sector continued. Only intermediate goods production recovered somewhat after significant declines in previous quarters. By contrast, capital and consumer goods production fell. Motor vehicle production, in particular, was markedly lower than in the previous quarter. There were signs of bottoming out in particularly energy-dependent sectors such as the chemical industry. According to European Commission Business and Consumer Surveys, the weak industrial activity continued to be driven by a lack of demand. By contrast, shortages of materials and labour now appear to be far less relevant. Above and beyond that, price pressures at the producer level eased considerably. Producer and import prices fell significantly on the year, mainly owing to falling energy prices but also to declining prices for intermediate goods. Capacity utilisation fell further below its long-term average between January and April.

The services sector improved in the first quarter. Activities in the hotel and restaurant sector and among business-related service providers are likely to have increased markedly. In addition, the expansion of the information and communications sector appears to have intensified. According to European Commission surveys, however, labour shortages weighed on the services sector as a whole.

At the beginning of the year, growth in macroeconomic activity was broadly spread across Member States. This improvement in the economic situation was seen above all in those countries where the negative effects of the energy crisis, high inflation and Russia’s war on Ukraine had previously been particularly strong, including Germany. 4 Economic activity in the southern Member States, by contrast, remained relatively vigorous, supported by lively tourism and projects funded by the European Recovery Fund. 

Economic output in France rose markedly at the beginning of the year. According to initial estimates, real GDP grew by 0.2% in the first quarter, following a slight increase in the previous quarter. Positive stimuli came from domestic demand. Private consumption rose markedly, especially in the services sector. Investment also expanded markedly after the weak second half of 2023. Exports remained buoyant. In addition to exports of goods, the favourable tourism business also played a role. Imports also increased again after their significant decline at the end of the year. On the output side, the growth boost was solely attributable to the services sector. By contrast, industrial output suffered a setback, and the construction sector again experienced a steep decline.

In Italy, macroeconomic activity increased markedly in the first quarter. According to provisional data, real GDP rose by 0.3%, following an increase of 0.1% in the final quarter of 2023. Exports were the main source of this increase. By contrast, domestic demand remained rather weak. Private consumption is likely to have fallen further, and investment appears to have increased only marginally despite buoyant construction activity. As a result, imports are also likely to have declined. On the output side, both industrial output and activity in the services sector picked up somewhat.

In Spain, the vigorous cyclical upswing continued. According to initial estimates, real GDP increased by a seasonally adjusted 0.7%, as in the previous quarter. Growth was driven by a further increase in consumer spending and a substantial increase in exports, particularly of services. Investment activity also increased markedly, especially in equipment and non-residential buildings. On the output side, activity in the manufacturing, construction and retail sectors increased significantly. 

Growth in economic output was also quite strong in several smaller Member States. Real GDP rose again significantly in Portugal, Slovakia and Cyprus in particular. Economic output grew moderately in Belgium and Austria. Activity stagnated in the Netherlands and Slovenia. In Finland, Lithuania and Latvia, which had been particularly affected by the war in Ukraine, the economic situation improved. In Estonia, by contrast, the recession continued. 

Euro area labour market conditions remained favourable in the first quarter of 2024. Unemployment held steady at its low of 6.5%, and the number of people in employment rose again very robustly. However, labour market tightness has decreased somewhat recently. According to a European Commission indicator, labour hoarding declined somewhat, 5 and employment expectations for the next three months diminished. The vacancy rate fell in line with the subdued economic activity. Wage growth is likely to have been comparatively high in the first quarter, too, at between 4% and 5% on the year. 

Consumer price inflation strengthened again in the first quarter of 2024 in comparison to the last quarter of 2023. Inflation as measured by the Harmonised Index of Consumer Prices (HICP) was 0.7% higher in seasonally adjusted terms on the quarter. This was mainly due to greater momentum in service prices, which are determined by wages in particular. However, prices for industrial goods (including energy) and processed food also continued to rise. Only prices for unprocessed food fell somewhat. 

Headline inflation, measured as the annual change in the HICP, nevertheless declined. Non-energy industrial goods inflation, in particular, fell markedly from 2.9% in the last quarter of 2023 to 1.6% in the first quarter of 2024. By contrast, service and food price inflation remained significantly higher at 4%. Energy prices were still below their previous year’s level. However, the gap narrowed markedly. As a result, headline HICP fell further only slightly to 2.6%, compared with 2.7% in the previous quarter. The rate excluding energy and food fell more significantly, from 3.7% to 3.1%. 

Inflation remained markedly elevated in April, too. In April, prices for almost all components rose more sharply in seasonally adjusted terms than in March. Only non-energy industrial goods prices decreased. This weakened the disinflation process somewhat. This was mainly due to the resurgence of energy prices and continued high wage growth. Annual HICP inflation persisted at 2.4%. While the core rate fell somewhat further from 2.9% to 2.7%, the increase in services prices remained markedly higher.

The underlying pace of the economic recovery in the euro area is likely to remain subdued for now. Part of the surprise growth seen in the first quarter is likely to be due to a temporary improvement in the construction sector. There could be a countermovement in this area in the second quarter. Sentiment indicators also do not yet indicate a significant strengthening of the underlying economic trend, and economic activity appears to remain divided. While, at least in some segments, services sector activity has been lively, industrial output remains weak. Production expectations in industry declined again in April, and order books were assessed less favourably. The outlook for the construction sector also remains extremely subdued given the strict financing conditions. The outlook for private consumption seems to be better. Consumer confidence rose up to April, with households noticeably feeling better about their financial situation, in particular. Tourism business, in particular, could benefit from this. Any marked strengthening of macroeconomic growth in the euro area would probably require the high level of uncertainty arising from geopolitical conflicts to first subside.

Deutsche Bundesbank (2018), Activities of multinational enterprise groups and national economic statistics, Monthly Report, October 2018, pp. 65-78.

Dieppe, A., R. Legrand and B. van Roye (2018), The Bayesian Estimation, Analysis and Regression (BEAR) Toolbox, version 4.2.

European Commission (2023), A new survey-based labour hoarding indicator, European Business Cycle Indicators: 2nd Quarter 2023, European Economy Technical Paper, No 066, pp. 20-29.

International Energy Agency (2024), Oil Market Report, May 2024.

International Monetary Fund (2024), World Economic Outlook: Steady but Slow: Resilience amid Divergence, April 2024.