The Eurozone economy is expected to contract in the fourth quarter, given a sharp drop in output and worsening demand in October
Business activity in the Eurozone decreased in October at the fastest pace in nearly two years as high inflation makes consumers wary and curbs demand, S&P Global survey results showed, adding to signs that the region is entering a recession.
Manufacturing businesses have been hit hard by rising energy prices as well because supply chains they were hit by the Russian invasion of Ukraine before they had even fully recovered from the coronavirus pandemic.
S&P Global’s PMI, which reflects the performance of manufacturing and service sector firms, fell to 47.1 from 48.1 in September, the lowest since November 2020.
It is the fourth month that the index has moved below the value of 50 points, which is the boundary between growth and contraction of activity.
“The Eurozone economy is expected to contract in the fourth quarter, given a sharp drop in output and a deterioration in demand in October, reinforcing estimates that a recession looks increasingly inevitable,” said S&P Global chief economist Chris Williamson.
“Demand is slowing significantly and companies are increasingly concerned about high inventories and weaker-than-expected sales, particularly as winter approaches. The risks, therefore, are in the direction of an acceleration of the fall towards the end of the year”, he added. The composite index for new orders fell to 45 – a near two-year low – from 46.3 in September.
Inflation in the Eurozone climbed to a record level of 9.9% in September, resulting in a significant decrease in demand.
The PMI for the services sector eased to 48.2 from 48.8 in September, while indicators for input and output prices in the sector hovered near record highs.
The index for the manufacturing sector fell to 46.6 from 48.4, the lowest level since May 2020, while the manufacturing index plunged to 44.2 from 46.3.
With no end to the war in sight, factory officials’ optimism for the coming year fell further, with the index of future production falling to 44.8 from 45.3 points, the lowest level since May 2020, in the first period of the pandemic.
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