The eurozone is almost certainly heading into recession, with polls on Monday showing a worsening cost-of-living crisis and a bleak future, leaving consumers wary. Although growth has slowed according to polls, prices remain high. The ECB is under pressure as inflation quadruples its 2% target, hitting a record high of 9.1% last month. The central bank is considering raising interest rates further as the economy enters a new period of slowdown. However, rising borrowing costs will cause concern among indebted consumers.

In a Reuters poll released last week, about 50% of economists polled said they expected a surprise rate hike of 75 basis points this week, while the rest thought it would be capped at 50 basis points. Despite these expectations, the euro yesterday traded below $0.99 for the first time in 20 years after Russia’s decision to shut down a key gas pipeline to Europe indefinitely. Natural gas prices surged 30% on Monday, raising concerns about the possibility of storing it and fears of a recession and a harsh winter ahead, when businesses and households face unimaginable energy costs.

The S&P Global PMI, an indicator of the health of the economy, hit an 18-month low of 48.9 in August from 49.9 in July, below initial forecasts of 49.2. It is noted that any price movement below 50 points is a sign of contraction. “PMI shows that the eurozone is entering a recession earlier than we initially thought, which is largely due to the German economy. In addition, we are now seeing a longer recession that will last three quarters,” says Peter Skafrik from Royal Bank of Canada.

Germany’s service sector contracted for a second straight month in August as domestic demand was capped by runaway inflation and weakening consumer confidence. According to a Reuters poll, the German economy is expected to contract for three consecutive quarters, starting with the one we are experiencing now.