The euro zone is likely to enter recession as economic activity this month registered its fastest fall since November 2020 after a cost-of-living crisis made buyers wary and weighed heavily on demand, according to preliminary data from S&P Global on Monday. Reuters.
In particular, factories have been hit hard by rising energy prices, and supply chains that were recovering from the pandemic have now been hit by war.
“The euro zone is gradually slipping into a rather deep recession”
The Eurozone Composite Purchasing Managers’ Index (PMI), which measures activity in manufacturing and the services sector, fell to 47.1 in October from 48.1 in the previous month, while analysts had expected a decline to 47.5. This month’s data represents the lowest level of the indicator assessing the general economic situation in November 2020.
The PMI indicator above 50 points indicates an expansion of the economy, and below the value of 50 points the indicator reflects the contraction of the economy.
- “Preliminary PMI data further prove that the Eurozone is slowly slipping into a fairly deep recession, while inflationary pressures remain intense.
- The evidence so far suggests that Germany’s problems are much bigger than France’s,” said Andrew Cunningham of Capital Economics.
Due to high energy costs, Germany, Europe’s largest economy, faces a sharper drop in economic activity in October.
France, the eurozone’s second-largest economy, is also plagued by fears of high inflation and economic activity has slowed.
Annual inflation in the eurozone hit a record high of 9.9% in September, well above the ECB’s 2% target. According to analysts’ forecasts, the ECB interest rate on deposits will reach 2.5% by March 2023, which is significantly higher than the level of 1.5% predicted in the previous survey. This increase includes a 75 basis point interest rate hike at the October 27 meeting and another 50 basis point increase in December.
The services sector PMI, which dominates the eurozone, fell to 48.2 in October from 48.8 in the previous month, the lowest level in 20 months.
A gauge of industrial activity fell to 46.6 in October from 48.4 the previous month, the lowest level since May 2020. (Source: Agerpres / Photo: Dreamstime.com)
Source: Hot News RO
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