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    PMI points to probable recession in the Eurozone with price increases hitting demand

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    Eurozone services PMI dropped from 49.8 to 48.9 (Image: REUTERS/Andreas Gebert/File Photo)

    The slowdown in business activity across the euro zone deepened in September, according to a survey that showed that the economy is likely heading into recession as consumers rein in spending amid a cost-of-living crisis.

    The manufacturing industry was particularly hit by high energy costs after the invasion of ukraine Russia has pushed up gas prices, while the bloc’s dominant service sector has suffered as consumers stay home to save money.

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    O Composite purchasing managers index (PMI) S&P Global, seen as a good indicator of overall economic health, dropped to 48.2 in September from 48.9 in August, as expected in a survey by S&P Global. Reuters.

    “The third consecutive drop for the Eurozone PMI indicates that business activity has been contracting over the course of the quarter. This confirms our view that a recession may have already started,” said Bert Colijn of ING.

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    A Reuters poll earlier this month gave a 60% chance of a eurozone recession within a year.

    The euro zone services PMI fell from 49.8 to 48.9, its second month below 50 and the lowest reading since February 2021.

    The Reuters poll predicted a more modest drop to 49.0.

    With prices rising again and demand falling, optimism about the next 12 months has waned. The business expectations index dropped to 53.8 from 56.6, the lowest since May 2020.

    THE industry also had a worse month than expected. Its PMI dropped to 48.5 from 49.6, compared with a 48.7 forecast in the Reuters poll and the lowest since June 2020. An index measuring output, which feeds into the composite PMI, fell from 46, 5 to 46.2.

    Germany and France

    The slowdown in German business activity has deepened as higher energy costs hit the world’s biggest economy. Europe and the companies saw a drop in new business, the data showed.

    At FranceHowever, activity was higher than expected as a modest recovery in services offset a slump in manufacturing.

    “It is possible that the German GDP fell in the third quarter, while the French economy had a small expansion, consistent with our view that the Germany will suffer more than most in the coming quarters as high energy costs weigh on energy-intensive industry and household budgets,” said Jack Allen-Reynolds of Capital Economics.

    At the UKout of European Unionthe economy worsened as companies struggled with rising costs and faltering demand, reinforcing the growing risk of recession there as well.

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    Source: Moneytimes

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