The specter of a recession seems to be looming as inflationary pressures mount.
The decline in economic activity in the euro zone accelerated in September in the private sector, heightening fears of a recession fueled by soaring prices, according to the Flash PMI index published Friday by S&P Global. The index, calculated on the basis of business surveys, fell to 48.2, its lowest level for 20 months, against 48.9 in August. It fell for the third consecutive month. A figure below 50 signals a contraction in activity.
“An economic recession is looming in the Eurozone, with companies in the region reporting a deterioration in the economy as well as rising inflationary pressures, linked to a spike in the cost of energy“, commented Chris Williamson, economist of S&P, quoted in a press release. The September index corresponds, according to him, to a drop in gross domestic product (GDP) of 0.1% in the third quarter.
Germany on the front line
The 19 countries sharing the single currency register their “weakest economic performance since 2013“, if we put aside the period of confinement during the Covid pandemic in 2020, explained Chris Williamson. “It is in Germany that the economic situation has deteriorated most sharply“, he underlined. The largest economy in the euro zone is suffering the greatest deterioration in its economic situation since 2009 when global activity was devastated by the great financial crisis.
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European leading indicators do not bode well for the coming months. On the contrary, they leavepredict an acceleration of the contraction in the fourth quarter“warned this expert. According to S&P, the supply difficulties have “somewhat attenuated“. But now”energy issues and the rising cost of living are at the heart of business concerns“.
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