Europe continues to show signs of economic weakness, with a worsening scenario. GDP can still collapse in the fourth quarter. here’s what the latest data says.
Europe continues to post weak economic results, putting the recovery at risk and leaving the door open to recession.
Specifically, the slowdown in economic activity in the Eurozone accelerated last month due to further weakening of demand in the services sector. As specified by Cyrus de la Rubia, chief economist of the Commercial Bank of Hamburg, October is confirmed as the third month in a row where commercial activity has suffered a severe blow. With new business in steep decline, it’s not painting a rosy picture for the foreseeable future.
The last quarter of the year started off on the wrong foot for the Eurozone, bringing the region closer to recession and putting even more pressure on the ECB to ease monetary policy.
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The HCOB PMI, compiled by S&P Global and considered a good guide to overall economic health in the Eurozone, dropped to 46.5 in October from 47.2 in September, the lowest reading since November 2020.
The result is below the threshold of 50, separating growth from contraction for the fifth consecutive month, though it’s just a preliminary estimate. The PMI for the services sector did not go beyond 47.8.
The official note states that the latest survey data have indicated a worsening of demand conditions faced by service providers, in the face of a decline in new business volumes at the fastest pace since January 2021. This also reflects greater restraint from non-domestic customers, as evidenced by new export business declining the fastest in more than two and a half years.
What is observed in the Eurozone is a real headache according to the analysis of Cyrus de la Rubia, who commented on the data by highlighting: "Prices continue to rise, but they do not go hand in hand with demand as they normally do. While economic activity entered recessionary territory, price indices remained high. There’s a name for this: stagflation. The million-dollar question is: how long will we be stuck in this strange stagflation zone? PMI data is signaling a bit of a wait. For the ECB this means that it is not yet time to cut interest rates.”
The general vision of service SMEs in Europe is truly not very encouraging. Spain stands out with a score of 50. France, however, is the worst-performing country in this group, followed by Germany. Meanwhile, Italy is close to Germany in terms of poor performance. “All in all, Eurozone GDP could collapse in the fourth quarter”, de la Rubia said.
Manufacturing activity took a further step back in October, according to a survey last week that showed new orders contracting at one of the fastest rates since data was collected for the first time in 1997.
Original article published on Money.it Italy 2023-11-06 15:11:00. Original title: Lo scenario economico peggiora in Europa, il Pil può crollare?
