Belgian real GDP grew by 0.2% in the third quarter of 2022. While this constitutes a clear slowdown compared to the second quarter, it is clearly better than the NAI’s initial flash estimate of -0.1% and our own estimate of -0.2% in the previous Business Cycle Monitor.

GDP benefitted in particular from an unexpected expansion in household consumption and services, even though consumer confidence remains near a record low. Current indicators point to a stagnation in household consumption in the fourth quarter of 2022, although it is likely to pick up beyond the near term as price pressures soften and indexation mechanisms push up nominal incomes.

Even more than in previous quarters, escalating production costs and an uncertain economic outlook led to a contraction in business investment in the third quarter. Business sentiment and demand expectations remain at low levels, although some improvement was seen in the latest data. Overall, we expect business investment to decline again in the fourth quarter. Housing investment is expected to edge further down, as well.

Government consumption should grow very moderately in the fourth quarter, while the roll-out of investment plans is expected to lead to positive growth in public investment. The contribution of net exports to growth should once again be negative in the fourth quarter, as export growth is likely to underperform import growth.

The NBB nowcasting model BREL currently estimates quarterly growth in the fourth quarter at around -0.1%, while the R2D2 model is clearly more optimistic, predicting a growth rate of 1.0%. It should be noted that the estimates provided by these nowcasting models remain highly uncertain as the massive shocks experienced since the start of the COVID-19 crisis constitute a challenge for the estimation of standard time series models.

All in all, we currently expect economic activity to contract by 0.1% in the fourth quarter. This is below the median estimate of the one-indicator models and in line with the estimate of the most downbeat of our two nowcasting models. It should again be stressed that the uncertainty of this nowcast is high. Indeed, given the recent positive surprises in terms of household consumption and the labour market, a more positive outcome is definitely possible. The balance of risks appears to be on the upside.