EU business activity likely to endure recession

Eurozone is pessimistic

Business activity in the eurozone continues to decline - the S&P Global’s final composite index PMI fell to a 20-month low of 48.2 in September from August’s 48.9.

Let us remind you that an index value above 50 points indicates an increase in activity, and a value below 50 points indicates a contraction.

Germany suffered the sharpest contraction: the composite index here fell from 46.9 to 45.9 points.

In France, the composite index value rose from 50.2 to 51.2 points - the service sector compensated for the decline in industry, but, according to S&P Global, growth rates in the third quarter will be lower than in the second.

Inflation is putting pressure on demand, rising energy bills are also driving up costs for companies – new orders for goods and services have been declining for the third month in a row, S&P notes.

The current fall in PMI is equivalent to a contraction in GDP of about 0.1% in the third quarter while worsening expectations suggest a more significant decline in the fourth quarter, which will mean the eurozone will enter a recession, S&P notes.

World trade will be suppressed

World merchandise trade volume is expected to grow by 3.5% in 2022 before slowing to 1.0% in 2023. This is stated in the published report of the WTO. In the previous forecast, experts predicted a growth rate of 3.4% in 2023.

Among the “shocks” faced by the world economy, the WTO names the war in Ukraine, high energy prices, inflation, and monetary policy tightening.