Economic Divergence for Europe In the First Quarter of 2024: A Mixed Bag of Growth and Decline

In the first quarter of 2024, Europe’s leading economies experienced modest gains in disposable household income per capita, with increases ranging from 0.2% to 3.4%. Similarly, real GDP per capita showed positive growth in most European nations during the same period, according to data from the Organisation for Economic Co-operation and Development (OECD).

Poland saw the most substantial rise in disposable income per capita, surging by 10.2% after a 2.7% decline in the last quarter of 2023. The OECD noted that this uptick was largely fueled by higher employee compensation, enhanced social benefits (excluding in-kind transfers), and increased property income.

Portugal followed closely, recording a 6.7% increase in disposable income per capita. Among Europe’s largest economies, Italy led the way with a 3.4% rise, which the OECD linked to a rebound in employee compensation and in-kind social transfers after a previous downturn.

Spain and Germany also reported notable gains in real household income per capita. Spain’s income grew by 1.5%, building on a 3.7% rise from the previous quarter, while Germany saw a 1.4% increase, up from a mere 0.1% in the prior period. This growth was partially attributed to higher employee compensation. In France, real household income per capita rose by 0.6%, supported by increased basic pension benefits aimed at keeping pace with inflation. The United Kingdom, however, recorded a smaller increase of 0.2%.

In contrast, Greece faced the steepest decline in disposable income per capita, with a 1.9% drop. Belgium, Czechia, and Hungary also saw decreases, with disposable income falling by 1.4% in Belgium and Czechia, and by 0.7% in Hungary. Sweden and Denmark experienced slight declines as well.

Real GDP per capita, adjusted for inflation, increased in 21 out of 27 European countries, although the growth was minimal in some cases. Turkey led with a 2% rise, followed by Latvia at 1.1%. Among the top five economies, Spain and the UK saw the largest GDP per capita growth, both at 0.5%, while Italy’s GDP per capita grew by 0.4%. France and Germany each saw a 0.2% increase. However, Iceland and Denmark experienced the most significant GDP declines, with reductions of 1.5% or more.

When comparing real household income per capita with real GDP per capita, several European countries showed notable discrepancies between the two metrics. For instance, Greece saw a 0.9% rise in real GDP despite a 1.9% drop in household income. A similar trend was observed in Czechia, where GDP grew by 0.6% while household income fell by 1.4%. On the other hand, the Netherlands presented an inverse situation: while real GDP declined by 0.6%, household income per capita increased by 2.5%.

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