Europe almost certainly heading into recession
September 6, 2022 - A gloomy outlook in recent surveys indicates the eurozone is almost certainly heading into recession as the cost of living crisis continues to deepen.
The eurozone is very likely entering a recession, after the S&P Global Eurozone Purchasing Managers’ Index (PMI) Composite – seen as a guide to economic health – fell to an 18-month low of 48.9 in August (anything below 50 indicates contraction).
The European Central Bank (ECB) is under pressure from a deepening cost of living crisis, setting inflation running at more than four times its target of 2% to reach a record 9.1% last month.
The ECB faces the prospect of having to raise interest rates further as the economy slumps – a rise in borrowing costs adding to pressures on debt-laden consumers.
The euro dropped below $0.99 for the first time in 20 years on Monday after Russia indefinitely shutdown its main gas supply to Europe – causing gas prices to soar by as much as 30% and reinforcing expectations of a eurozone recession.
Note: The S&P Global Eurozone PMI Composite Output tracks business trends across both manufacturing and service sectors, based on data collected from over 5,000 companies (60% from the manufacturing sector and 40% from the services sector).