The Eurozone’s economy probably contracted in this year’s third quarter, according to the Hamburg Commercial Bank’s newest composite purchasing managers index (PMI).

Although the index ticked up to 47.2 in September from August’s 46.7, it remained below 50 for the fourth consecutive month.  

Readings below 50 indicate economic contraction.

With the index signaling contraction for a fourth month in a row, the Eurozone’s economy likely contracted in this year’s third quarter, Reuters concluded.

Both the manufacturing and services sector showed continued weakness, the PMI found.

Retail sales slumped in August more than expected, European Union data showed.

“The drop in retail sales in August and weakness in the final PMIs for September are consistent with our view that the euro zone economy will fall into recession in the second half of 2023,” economist Franziska Palmas at Capital Economics told Reuters.

September’s new business index fell from 44.6 in August to 44.4 in September, a level last seen in November 2020 amid the depths of the COVID War. 

A different survey released 23 October found the zone’s manufacturing activity “remained mired in a deep and broad-based downturn” in September “as demand shrank at a pace rarely surpassed since the data was first collected in 1997,” Reuters said.

TREND FORECAST: Over the past year, Europe has been wobbling on the edge of a Dragflation: Declining economic growth and rising inflation. 

The region’s economy grew by a scant 0.1 percent in this year’s second quarter. A contraction in the third quarter would put the Eurozone on track for at least a technical recession, defined as two consecutive quarters of economic shrinkage.

Higher interest rates work their way through the region’s economy, inflation continues to outpace growth in GDP, and a tight labor market are pushing wages up. Winter that sees a prolonged Mideast war will test Europe’s energy reserves and keep prices at least at their current levels.
As to where it is going and what to expect, please see our ECONOMIC UPDATE in this issue of The Trends Journal.

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