Industrial production in the 19-country Eurozone moved down 2 percent in October from September, a contraction 25 percent greater than expected by economists Reuters had polled, ending several months during which factory output across the zone remained relatively steady.
Production declined in Europe’s four main industrial nations of Germany, France, Italy, and Spain and rose only in four of the other 15.
The drop is another indication that Europe is approaching a recession if not already in one, the Financial Times said.
Factories cut back production as energy prices remained at stratospheric levels and consumer demand weakened under pressures of inflation and economic pessimism.
The continent’s shrinking economy was a factor that helped persuade the European Central Bank to raise interest rates by only a half-point last week, scaling back from the three-quarter-point hikes that marked its last two meetings. (See “ECB Lifts Key Interest Rate by a Half-Point” in this issue.)
TRENDPOST: Europe’s economy is stuck in Dragflation, our Top 2022 Trend in which prices rise while the economy contracts.
The question now is not whether Europe will enter a recession but how long its recession will last. And the big unanswered question is how long will the EU support the Ukraine War and keep sanctions imposed on Russia which have dramatically driven up energy costs and overall inflation… which in turn is responsible for businesses closing down due to the unaffordability of doing business.