Eurozone economy stuck in trouble, recession risk increasing

The Eurozone economy is stuck in a rut, according to chief economist Cyrus de la Rubia of Hamburg Commercial Bank, adding that the latest figures suggest GDP is likely to shrink for the second consecutive quarter.

Giá trị đồng Euro thấp 'chưa từng thấy', kinh tế Eurozone chệch hướng vì lạm phát

Eurozone economy risks recession. (Source: AFP)

The S&P Global Purchasing Managers' Index (PMI) continued to decline in November 2023, hitting 47.1. While that was a larger increase than economists had expected, it marked the sixth consecutive month the PMI has been below the 50 mark that separates growth from contraction.

Manufacturing and services figures show similar trends.

The forecast comes after Eurozone gross domestic product (GDP) fell 0.1% in the three months to September 2023, contradicting the European Commission's forecast of a return to growth.

However, it is in line with warnings from European Central Bank (ECB) Vice President Luis de Guindos that markets may not be fully pricing in the risk of a further hit to the eurozone economy after a year of rising interest rates and rising political tensions.

Bloomberg Television quoted Mr. Guindos as saying that market expectations for the economy appear to be a bit optimistic.

The eurozone's top two economies, Germany and France, saw significant declines, although Germany's November PMI figures were slightly better than France's, chief economist de la Rubia said.

The pace of contraction in Germany slowed slightly in November, a sign that growth is returning to the eurozone's largest economy after a likely recession this year.

German private sector activity contracted at a slower pace than the previous month and less than economists had expected, according to S&P Global. Both manufacturing and services sectors saw improved conditions, with new orders falling moderately.

"Although the eurozone's largest economy remains in contraction, the rate of decline has slowed significantly. As a result, there is growing confidence in the prospect of the economy returning to growth, possibly in the first half of 2024," Mr. de la Rubia emphasized.

In addition, inflation remains a problem in France and Germany, with service firms blaming rising wages for pushing up input prices and still rising output costs.

This outlook suggests inflation is unlikely to decline in the coming months, Mr. de la Rubia asserted.

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