Euro zone recession fears harden

euro-zone-recession-fears-harden
Euro zone recession fears harden

The downturn in euro zone business activity accelerated last month as demand in the dominant services industry weakened further, a survey showed on Monday. This suggests that there is a growing chance of a recession in the 20-country currency union.

Official data has shown that the economy contracted 0.1% in the third quarter. The final Composite Purchasing Managers’ Index (PMI) for October, released on Monday, indicated that the bloc entered the final quarter of 2023 on the back foot.

HCOB’s PMI, compiled by S&P Global and seen as a good guide of overall economic health, fell to 46.5 in October from September’s 47.2. This is its lowest reading since November 2020 when COVID-19 restrictions were tightened on much of the continent. The reading was below the 50 mark separating growth from contraction for a fifth consecutive month and matched a preliminary estimate.

Adrian Prettejohn at Capital Economics said, “Final PMIs released today confirmed the preliminary estimates and are consistent with our forecast that euro-zone GDP will contract again in Q4.” He also noted that the outlook looks very weak, with the new orders PMI falling to its lowest level since September 2012, excluding the early pandemic months, while exports were also particularly weak.

According to a sister survey last week, manufacturing activity took a further step back in October. The survey showed that new orders contracted at one of the steepest rates since the data was first collected in 1997.

Services activity in Germany, Europe’s largest economy, slipped back into contraction in October amid persistent weakness in demand. In France, services activity also shrank again. Italian services activity contracted for a third month running and at its fastest pace in a year. However, Spain bucked the trend and its services sector grew at a slightly faster rate last month.

In another bright spot, investor morale in the euro zone rose more than expected at the start of November, with expectations for the future at their rosiest since early this year, according to Sentix’s index.

Last month, the European Central Bank left interest rates unchanged at record highs, ending an unprecedented streak of 10 consecutive rate hikes. However, policymakers insisted that growing market talk of rate cuts was premature.

Policymakers at the European Central Bank, who have failed to get inflation to target, will likely take some cheer from easing price pressures shown in the PMI survey. Both the input and output prices indexes fell from their September readings.

Reporting by Jonathan Cable; Editing by Hugh Lawson and Toby Chopra

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Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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