On 23 September, the euro’s value sagged to $0.975, its lowest since 2002, after S&P Global published a survey finding that business conditions in Europe are their worst in 20 months as inflation continues at or near record highs.

The euro sagged to $0.96 in late Monday trading and closed today at $0.959.

S&P’s composite purchasing managers index (PMI), which assesses business conditions in both the manufacturing and service sectors, edged down 0.7 percent to 48.2 this month, its third consecutive month moving further below 50, the mark that separates economic expansion from contraction.

Manufacturers reported a fourth straight month of reduced production and “some evidence of energy market developments limiting production capabilities.”

Europe has entered a full-on energy crisis now that Russia has shut off natural gas deliveries through the Nord Stream 1 natural gas pipeline into Germany as retaliation for Western sanctions levied in response to Russia’s attack on Ukraine.

Europe’s employment levels this month are unchanged from August, which set a 17-month low.

The PMI rating strengthens the belief that Europe has entered a recession.

Deutsche Bank already has predicted the region’s GDP will shrink by 2.2 percent next year and 3 percent by 2024. The bank also sees Germany’s economy falling by 3.5 percent on weakened demand for manufactured products.

Europe’s stock markets plummeted on news of the survey and took the euro’s value down with them.

Germany’s 10-year bond yield surpassed 2 percent for the first time since 2011, while the country’s Dax-40 stock index gave up 1.4 percent to sink to a nearly two-year low. 

“The stagflationary shock is real and is intensifying,” economist Claus Vistesen at Pantheon Macroeconomics told the Financial Times.

The combination of inflation and rising prices is significantly due to Russia’s decision to shut off most of its gas exports to Europe, with substitute fuels being harder to come by, in part, because of Western sanctions on Russian oil and coal imports as punishment for its attack on Ukraine.

TREND FORECAST: The world was drifting toward recession before Russia invaded Ukraine. The combination of the COVID War which destroyed the lives and livelihoods of scores of millions throughout Europe and the Ukraine War sanctions the U.S. and NATO imposed on Russia has greatly damaged their economies. 

Europe, which relies so heavily on Ukraine and Russia for food, energy, and manufactured goods, will enter into a prolonged recession.

Even if the war ends soon, it will take an indeterminately long time to re-establish Ukraine’s productive capacities and logistics chains; sanctions could remain in place against Russia indefinitely after the shooting stops.

Barring unforeseeable developments, Europe is well on its way to a deep, extended recession that will help drag the rest of the world with it.

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