Eurozone downturn deepens, raising recession fears

Parts of the Haidach underground natural gas storage facility near Haidach, Austria, August 4, 2022. (Photo: CFP)

European economic activity fell once again in September, a closely-watched survey showed Friday, heightening expectations of an impending recession.

"The Eurozone economic downturn deepened in September, with business activity contracting for a third consecutive month," the S&P Global Flash Eurozone PMI said.

"Although only modest, the rate of decline accelerated to a pace which, barring pandemic lockdowns, was the steepest since 2013."

The purchasing managers' index fell from 48.9 in August to 48.2 in September – with a score under 50 representing economic contraction.

"A eurozone recession is on the cards as companies report worsening business conditions and intensifying price pressures linked to soaring energy costs," Chris Williamson, chief business economist at S&P Global Market Intelligence, said.

"Germany is facing the toughest conditions, with the economy deteriorating at a rate not seen outside of the pandemic since the global financial crisis."

Rocketing energy prices and steep rises in the cost of living are hitting demand and limiting manufacturing output.

Inflation in the eurozone climbed to 9.1 percent in August, an all-time high, with analysts predicting the rate could reach double digits by the end of the year.

The European Central Bank raised its interest rates by a record large 75 basis points this month, and has pledged to do all it can to curb the surge in consumer prices.

Williamson said indications pointed to a eurozone contraction of 0.1 percent in the third quarter of 2022 and a steepening decline in the fourth quarter.

"The challenge facing policymakers of taming inflation while avoiding a hard landing for the economy is therefore becoming increasingly difficult," Williamson said.