The eurozone economic contraction intensified in September, with the PMI indices for the services sector reading at a 19-month low, the manufacturing sector at a 27-month low and the composite sector at a 20-month low.
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"A recession is on the horizon in the eurozone, as companies report worsening business conditions and intensifying price pressures related to soaring energy costs," notes S&P Global, according to which it is reporting "the worst economic performance since 2013, excluding the months of lockdown due to the pandemic."
That the Eurozone is already in recession, on the other hand, is the view of analysts at ING: The third consecutive drop in the Eurozone PMI indicates that business activity contracted throughout the quarter. "This confirms our view that the recession may have already started," argue the experts, according to whom at the same time, the August rise in energy prices is translating into more pressure on prices.
After a strong rebound from the contraction caused by the pandemic, the economy is now feeling the effects of high inflation more heavily at both the consumer and producer level. Led by Germany, which saw its composite PMI fall to 45.9 in September, the Eurozone saw its composite PMI drop to 48.2. Both services and manufacturing are well below the 50-point line at 48.9 and 46.2 respectively, signalling a broad contraction in economic activity.
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The manufacturing sector is bearing the brunt of supply chain problems that continue to hold back production. The surge in gas and electricity prices in August is leading to further price pressures for businesses in September, although other costs have moderated due to weakening global demand. This confirms the current stagflationary environment in the eurozone. The ECB has made it clear that it will continue to raise prices in a determined manner in the short term in an attempt to combat stubbornly high inflation. An increase of 75 basis points in October is therefore definitely on the table, say ING, despite the weakening economy.