A closely-watched survey by economists showed on Friday that European economic activity fell once more in September, raising expectations of a recession.
“The economic slowdown deepened in the eurozone in September, with business activity contracting for the third consecutive month, albeit modest, but the rate of decline accelerated to the most severe pace,” Standard & Poor’s Global Flash said. Since 2013, excluding pandemic lockdowns.
The Purchasing Managers’ Index fell from 48.9 in August to 48.2 in September – noting that it represents below the 50 economic contraction threshold.
“The stagnation in the eurozone is there,” said Chris Williamson, chief business economist at Standard & Poor’s Global Market Intelligence. Firms report deteriorating business conditions and increased price pressures linked to higher energy costs.
He added, “Germany is facing the most difficult conditions, with the economy deteriorating at a rate that we have not seen, except for the pandemic period, since the global financial crisis.”
The skyrocketing energy prices and the sharp rises in the cost of living have dampened demand and reduced manufacturing output. Eurozone inflation rose to 9.1% in August, its highest level ever, while analysts expect the rate to reach double digits by the end of the year.
The European Central Bank raised interest rates by a record 75 basis points this month and pledged to do everything in its power to limit the rise in consumer prices.
Williamson said that indicators point to a contraction of the euro area by 0.1% in the third quarter of 2022 and a sharp decline in the fourth quarter, noting that the challenge faced by policy makers in curbing inflation while avoiding a sharp decline in the economy is therefore becoming increasingly difficult.
(AFP)
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euro
Why Noël Le Graët, the president of the FFF, finds himself increasingly isolated
written by Alexandra Hartman Editor-in-Chief
” Not even in dreams ! » Questioned, in our columns, following rumors of his resignation, on the possibility that his succession is open, Noël Le Graët, faithful to his habits, tackled the impatient. But not sure that the president of the Federation prevents them from thinking, and not only at night, of settling in his chair. Everything is in fact now in place so that the ambitions hitherto directed towards December 2024, the end of the Breton’s mandate, seek to take a little head start.
The president of the German central bank prepared the ground on Sunday for new “significant” interest rate hikes in the euro zone in the face of soaring inflation despite the risk of recession which is becoming clearer.
“The step taken on Thursday” by the European Central Bank to raise its key rate by 0.75 percentage point “was a significant signal,” said Joachim Nagel.
“And if the inflationary situation remains as it is, other significant steps will have to be taken,” he warned.
“We have indications that inflation is spreading across many areas” of the economy, Nagel added.
He estimated that the inflation rate in Germany might reach a level “over 10%” over one year in December, a period which in his view should be the peak of the current inflationary surge.
The Bundesbank has so far been talking regarding a rate of 10% in the last months of the year and has thus darkened its forecast a little further.
Inflation should in his view decelerate in 2023 but Mr. Nagel estimated that it should remain “above 6%” next year, a level “much too high”.
Under these conditions, a continuation of the tightening of the cost of credit in the euro zone is unavoidable, said the boss of the German central bank, despite the negative impact that this policy risks having on growth.
Mr. Nagel considered it “possible” that Germany, Europe’s largest economy, slips into recession in the 3rd and 4th quarters of this year, and also remains there until the beginning of next year.
“There are a number of elements” that lean towards this scenario, he said.
The European Central Bank, whose main task is to ensure price stability, is aiming for an inflation rate of 2%.
Caught up by record and persistent inflation, it decided on Thursday to raise its interest rates on an unprecedented scale and its president, Christine Lagarde, warned that other increases would follow.
The Board of Governors of the monetary institution decided to raise its key rates by 75 basis points, a first in two decades of existence – apart from a technical adjustment in 1999.
The Japanese yen, sensitive to interest rate movements, continued to decline, today, Tuesday, exceeding the barrier of 142 once morest the dollar, while the pound sterling and the euro tried to recover from multi-year lows once morest the dollar the previous day, but the euro did not succeed in that. The dollar rose 1.07 percent once morest the yen. to 142.1, a new high in 24 years. The dollar has risen 23 percent once morest the Japanese currency so far this year. US 10-year Treasury yields rose 3.2557 percent, from Friday’s close of 3.191 percent. US markets were closed on Monday for the Labor Day holiday. And both the pound sterling and the euro rose by more than 0.6 percent once morest the dollar in morning trading in Europe. Although the British pound managed to cling to this trend somewhat, rising 0.35 percent at $1.1564, the euro fell to remain unchanged on the day at $0.99205, slightly above its 20-year low hit the day before. And Archyde.com reported, on Monday, that the new British Prime Minister Liz Truss is considering freezing household energy bills in an attempt to avoid the winter cost of living crisis for millions of families. It is scheduled to meet European Union ministers on the ninth of September to discuss urgent measures at the level of the bloc to discuss how to confront the rise in gas and energy prices, which harms the industry in Europe and burdens families with expensive bills, following Russia stopped gas shipments to the countries of the Union.