How will the output gap evolve in the United States and the euro zone in 2024?

If the output gap (the difference between the level of GDP and the level of potential GDP) falls, it is normal to expect a decline in core inflation. In the United States, given buoyant household consumption, we can expect growth to be close to potential growth in 2024, as in 2023, or even slightly above potential growth. In the euro zone, due to the lack of productivity gains, potential growth depends on growth in the working-age population and on the growth trend in the employment rate. Growth will therefore also be close to potential growth in 2024, as it was in 2023. While the output gap will vary little in 2024, core inflation will also vary little. But it is also important to take into account the effect of changes in import prices on core inflation (which involves the effect of headline inflation on wages and the effect of import prices on companies’ production costs). Core inflation in the United States is likely to be little affected by import prices, but in the euro zone it is likely to be increased by the transition from falling to rising import prices.