The eurozone economy is already on the brink of recession, here are the latest figures
What emerges from the first flash of the PMI leading indices published by Standard & Poor's relating to the eurozone. Giuseppe Liturri's analysis
The eurozone economy is slowing and already on the brink of recession. This is the data that comes this morning from the reading of the first flash of the PMI leading indices published by Standard & Poor's relating to the eurozone and its two main economies (Germany and France). As usual, the full data will be available in early October.
September saw the third consecutive month of slowdown in both manufacturing and services.
The composite index fell to 48.2 (48.9 August). The tertiary sector index fell to 48.9 (August 49.8) and the manufacturing sector fell to 48.5 (August 49.6). Recall that a value below 50 signals a contraction in activity.
Germany and France show a differentiated trend. From Berlin, the news is decidedly worse and the composite index drops to 45.9 (46.9 August), while Paris shows a decent hold (51.2 against 50.4 in August) thanks to the services sector which compensates for the retreat of the manufacturing sector.
Except for the pandemic crisis, there have been no such low figures since 2012.
The gloomy picture is completed by the prospects for the following months. A decrease in back orders, a flow of new orders and expectations of a slowdown also pose a heavy mortgage for the trend in October and the entire fourth quarter, for which the negative sign in front of the change in GDP appears to be a very probable event.
The role played by the increase in energy costs, through the slowdown in demand, held back by rising prices, is undeniable. The impact on production is also significant, which in many cases has been limited due to the supervening uneconomic nature.
Therefore, the scenario that until yesterday all forecasters defined as a "serious scenario", to distinguish it from the "adverse" one, begins to consolidate in the data, albeit based on sample surveys of companies. And the responsibility of those who – having all the tools to read in advance the occurrence of these events – has stubbornly held firm the balance of the public budget becomes increasingly serious. Preferring to shift sums from one item to another or redistribute much of the greater tax revenue inflated by inflation, to take short-term measures.
As happened during the pandemic, fiscal policy will be forced to intervene anyway. It will happen late and at a higher cost. With the aggravating circumstance that this time the ECB is also rowing in the opposite direction, having now launched towards a cycle of rate hikes.
Once again we present ourselves with our bare hands in front of a recession that risks turning into an economic depression.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/leconomia-delleurozona-e-gia-sullorlo-della-recessione-ecco-gli-ultimi-dati/ on Fri, 23 Sep 2022 09:36:47 +0000.