According to the latest statistics, Belgian economic activity expanded by 0.3% in the first quarter of 2024. This is very close to the estimate in the March 2024 Business Cycle Monitor (BCM) and in line with the NAI’s earlier flash estimate.

Household consumption growth slowed in the first quarter, against the backdrop of softening consumer sentiment. Fundamentals are, at least temporarily, somewhat weaker due to the slowdown in job creation and the deceleration in purchasing power. Household consumption growth is expected to remain moderate in the second quarter of 2024. Beyond the near term, however, fundamentals should strengthen again as the expected recovery in employment and the decline in inflation will fuel real income growth.

In real terms, first-quarter business investment grew markedly but this was mostly due to exceptional transactions. Cost-cutting in many firms is affecting investment spending and while underlying firm investment growth should stay positive, it is expected to remain moderate in the current quarter. A rise in residential investment in the first quarter came as a welcome surprise, but growth is expected to be muted, at best, in the second quarter and, indeed, could turn negative once again.

Net exports (excluding the exceptional sales of investment goods abroad) increased activity growth in the first quarter. An expansion of world trade and the gradual improvement in Belgian competitiveness should support export growth in the near term. The underlying contribution of net exports to GDP growth should remain positive in the current quarter.

Government consumption should decelerate somewhat in the second quarter. Government investment growth should continue to be boosted by the roll-out of specific investment programmes and the electoral cycle.

The NBB’s BREL and R2D2 nowcasting models currently estimate growth in the second quarter of around 0.3%, while the median of the one-indicator models came in at 0.5%.

All in all, a growth rate of 0.4% in the second quarter of 2024 currently appears to be the most plausible estimate. Risks to this nowcast are skewed slightly to the upside and are mostly related to a more favourable growth contribution from inventories, after their negative impact in the first quarter. If the recovery in manufacturing sentiment leads firms to increase inventories at a faster pace, growth could surpass current expectations in the second quarter.