Resilient Consumer Spending Drove Euro Area Economic Growth In 2022

Bridgette Randall
31 Jan, 2023
Frankfurt

European markets traded lower ahead of key rate decisions from the European Central Bank and the Bank of England. 

Despite the constant drumbeat of gloom and doom, the economies in the Euro Area expanded avoided a recession on the back of resilient consumer spending. 

Germany's retail sales declined 6.4% in December from the year ago, the Federal Statistics Office reported Tuesday. 

 

Euro Area Economy Expanded In 2022

The Euro Area economy unexpectedly expanded at 0.1% on the quarter in the fourth quarter and following 0.3% in the third quarter, Eurostat, the statistical office of the European Union reported Tuesday. 

In 2022, after adjusting for seasonality factors and calendar days, the Euro Area economy expanded at 3.5% and the European Union economy rose 3.6%, according to the preliminary report released by Eurostat. 

Ireland' economy surged 3.5% in the final quarter from the previous three months and jumped 15.7% from a year ago. 

Ireland has been a leading beneficiary of U.K.'s leaving from the European Union after many U.S. corporations shifted operations or financial assets to the nation.  

Economies of Germany contracted 0.2% and Italy shrank 0.1% but those of Spain expanded 0.2% and France increased 0.1% respectively, according to national statistics.   

 

IMF Lifts Global Growth Estimate 

The IMF revised global growth slightly on the resilient consumer demand in the U.S. and Europe despite the elevated energy prices and four-decade high inflation. 

The U.S. economy is expected to grow at 1.3%, China at 5.0% and India at 6.0%. 

Of the 22 largest economies in the world, only the UK is expected to shrink in 2023, according to the data released by the IMF. 

The UK's economy is expected to shrink 0.6% in 2023. 

 

Italy GDP Contracts In Fourth Quarter 

Italy's GDP shrank in the final quarter of 2022 after expanding for seven quarters in a row, ISTAT or the National Statistics Office reported Tuesday. 

Elevated inflation dragged real consumer spending in the final quarter after consumers retrenched and focused on basics. 

On a quarterly basis, gross domestic product declined 0.3% in the December quarter after rising 0.5% in the September quarter. 

On a yearly basis, GDP growth slowed to 1.7% in the fourth quarter from 2.6% in the previous quarter. 

In 2022, Italy's GDP after adjusting for seasonal factors and calendar expanded 3.9%, slower than 6.6% in 2021. 

 

European Market Indexes Traded Down 

The DAX index fell 0.4% to 15,069.20, the CAC-40 index declined 0.3% to 7,061.98 and the FTSE 100 index dropped 0.5% to 7,748.14.

 

European Bond Yields Advanced 

The yield on 10-year German Bunds hovered near 2.27%, French bonds traded near 2.74%, the UK Gilts traded at 3.30% and Italian bonds bounced around 425%. 

 

Europe Stock Movers 

UBS Group AG declined 2% to 19.42 Swiss  francs after the financial services provider said revenue declined but earnings rose in the fourth quarter. 

UBS said fourth quarter revenue declined 9% to $8.0 billion from $8.2 billion a year ago. 

Net income in the quarter rose to $1.65 billion from $1.34 billion and diluted earnings per share rose to 50 cents from 38 cents a year ago. 

In 2022, the Swiss bank repurchased $5.6 billion of its stock and the company said it plans to buy back $5 billion of its shares in 2023. 

The company also proposed a dividend of 55 cents to shareholders on record April 13 and payable on April 14, subject to the approval from the company's board at the shareholder meeting on April 5. 

UniCredit SpA soared 11.5% to €17.75 after the Italian bank reported record fourth quarter profit and the bank said it plans to return €5.3 billion to investors. 

Revenue in the fourth quarter increased 25.4% to €5.4 billion and net income rose to €1.04 billion from €338 million a year ago. 

Assets under management declined 11.7% from a year ago and flat from the previous quarter to €193.5 billion.

 Gross bad loans declined 20.3% from the previous quarter and dropped 46.6% from the previous year to €2.4 billion.  

Ricardo Plc fell 2% to 534.20 pence after the company reiterated its fiscal year outlook. 

Leoni AG declined 15% to €5.97 after the cable and harness maker said chief executive Aldo Kemper will depart the company as of March 31. 

The company is undergoing restructuring and struggling with a heavy debt load of €1.7 billion and equity of €178 million. 

Tele2 AB declined 3.9% to kr90.20 after the telecom service provider headquartered in Stockholm said 2023 revenue is estimated to grow in "low single-digit" in end user service and operating earnings adjusted for leased assets.  

End-user service revenue increased 3% from a year ago to SEK 5.1 billion due to strong  performance in the Baltics and business-to-business customers in Sweden. 

Net profit increased to SEK 1.25 billion from SEK 953 million and earnings per share rose to SEK 1.82 from SEK 1.39 a year ago.