Europe’s Economic Landscape: A Mixed Bag of Growth and Decline in Early 2024

The first quarter of 2024 has painted a complex picture of economic health across Europe, with most countries witnessing growth in both disposable household income per capita and real Gross Domestic Product (GDP) per capita. However, the extent of these increases, as well as their drivers, varied significantly across the continent, according to recent data from the Organisation for Economic Co-operation and Development (OECD).

Growth in Disposable Income and GDP Per Capita

During the first three months of 2024, disposable household income per capita in Europe’s leading economies crept upbetween 0.2% and 3.4%. This period also saw real GDP per capita rise across most European countries, indicating a general uptick in economic activity and living standards.

Poland led the charge with a remarkable 10.2% increase in disposable income per capita, a sharp reversal from the 2.7% decline recorded in the last quarter of 2023. The OECD attributed Poland’s surge to significant increases in employeecompensation, social benefits (excluding in-kind transfers), and property income.

Portugal followed with a 6.7% rise, making it the second-largest increase in disposable income in Europe.

Among the continent’s major economies, Italy emerged as the strongest performer, with a 3.4% increase in disposable income. Rising employee compensation and in-kind social transfers drove this gain, reversing the decline from the previous quarter.

Spain and Germany also saw noteworthy gains. Spain’s disposable income per capita rose by 1.5%, continuing its strong performance from the previous quarter, while Germany recorded a 1.4% increase, up from a meagre 0.1% in the last quarter of 2023. Improved employee compensation contributed to the growth in both countries.

France experienced a more modest increase of 0.6%, supported primarily by higher basic pension benefits to keep pace with inflation. The United Kingdom, meanwhile, saw only a slight increase of 0.2%.

However, not all countries share in prosperity. Greece experienced the largest decline in disposable income, dropping by 1.9%, followed closely by Belgium and Czechia, each with a 1.4% decline, and Hungary with a 0.7% drop. Sweden and Denmark also reported slight decreases in disposable income.

Moving markets

Real GDP Per Capita: A Mixed Bag

Real GDP per capita, adjusted for inflation, rose in 21 out of 27 European countries in the first quarter of 2024. Turkey led the way with a 2% increase, followed by Latvia at 1.1%.

Among Europe’s top five economies, Spain and the UK saw the largest rise, both at 0.5%. Italy recorded a 0.4% increase in real GDP per capita, while France and Germany each saw a modest 0.2% rise.

However, Iceland and Denmark experienced the steepest declines in real GDP per capita, with decreases exceeding 1.5%.

Contradictory Trends Highlight Economic Complexity

Despite the overall positive trends, some countries exhibited contradictory patterns between their disposable income and GDP per capita figures, highlighting the complexity of economic dynamics.

For instance, Greece’s real GDP per capita increased by 0.9% in the first quarter, but real household income fell by 1.9%. Czechia showed a similar contradiction, with a 0.6% rise in GDP and a 1.4% decline in household income.

Conversely, the Netherlands presented an opposite scenario: while real GDP per capita fell by 0.6%, real household income surged by 2.5%, indicating that income growth outpaced economic output.

Conclusion

The first quarter of 2024 reflects a period of both growth and disparity across Europe. While many countries, particularly in Central and Eastern Europe, saw significant gains in disposable income and GDP per capita, others faced declines or conflicting economic indicators. As Europe continues to navigate its economic recovery, these mixed results underscore the importance of tailored policy responses to address the unique challenges and opportunities faced by each nation.

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