The Eurozone economy most certainly shrank in Q3, Due to a severe fall in demand. With rising interest rates and prices, consumer spending decreased.
The eurozone economy, The third quarter of this year certainly saw a decline in the eurozone’s GDP, according to recent data and surveys. The region’s demand fell significantly in September, declining at its fastest rate in almost three years. Increased borrowing costs, higher prices, and cautious consumer spending among households with debt were some of the factors that caused this economic crisis.
Purchasing Managers’ Index (PMI) composite
S&P Global’s final Composite Purchasing Managers’ Index (PMI), regarded as a trustworthy gauge of the state of the economy as a whole, increased slightly from August’s reading of 46.7 to 47.2 in September. The important 50-point threshold was not reached by this number, signifying a fourth consecutive month of economic contraction. Even while it somewhat exceeded a rough forecast of 47.1, it nevertheless indicates that there are economic difficulties. It still indicates economic difficulties even if it somewhat beat a preliminary forecast of 47.1.
Broad-Based Recession
The economic slowdown was widespread, with declines seen in both the manufacturing and service sectors, just like what happened in August.
In August, retail sales fell.
Retail sales declined more significantly than was predicted in August, according to official figures. In light of the eurozone’s chronically high inflation rate, this suggests less consumer demand. The prognosis for the economy is causing analysts and experts growing alarm.
Forecast for a Recession in Late 2023
The eurozone economy may experience a recession in the second half of 2023, according to economists like Franziska Palmas at Capital Economics. This viewpoint is supported by the decline in retail sales in August and the dismal September final PMIs.
Various Results in Eurozone Countries
Each nation in the eurozone performs differently. For instance, although activity in the French service sector shrank at the highest rate in over three years in September, activity in the German service sector grew marginally. For the second consecutive month, the services sector in Italy also had a minor decline, although Spain’s services sector showed some resiliency by marginally growing following a decline in August.
Situation Different in the UK
A less severe decline in the services sector was observed in the United Kingdom, which is not a member of the European Union, than was previously anticipated. This is due to a number of factors, including an unexpected drop in inflation and the Bank of England’s decision to maintain current interest rates.
Index of New Businesses declines
The overall demand indicator for the eurozone, the composite new business index, decreased from 44.6 to 44.4 in September. This figure shows a low not seen since November 2020, when the COVID-19 outbreak was at its worst. Additionally, for the second consecutive month, the PMI for the dominating services industry fell below 50. However, it did marginally increase, moving from 47.9 to 48.7, which was somewhat higher than the flash estimate of 48.4.
Manufacturing Challenges
With severe and widespread declines in demand, the manufacturing sector in the eurozone continues to suffer considerable difficulties. Since data gathering started in 1997, the deterioration is happening at a rate that is rarely observed.
Trends in Employment
In spite of these economic difficulties, one encouraging development is that services companies in the eurozone boosted employment levels more quickly in September compared to August, with the employment index climbing to 51.5 from 50.4. This suggests that, despite the general economic downturn, the labor market has some resilience.
