According to Bloomberg, the eurozone economy may slide into a recession by the end of 2023. This is quite an alarming prediction. However, at first, it is necessary to figure out all the aspects of the issue.
Estimates provided by credit rating agency S&P Global unveiled that at the beginning of the fourth quarter, business activity in the region dropped to 46.5 points, reaching the lowest level in the last three years. The threshold that separates expansion from contraction is located at 50 points. Analysts consider this level an important indicator of economic health.
Notably, in early October, the PMI lacked just 3.5 points to rise to the 50-point reading, thus dashing traders’ hopes. Curiously, the data issued by the agency turned out to be below economists’ expectations. They foresaw a slight increase to 47.4 points. In this light, experts at Hamburg Commercial Bank assume a long-lasting recession in the second part of 2023.
Analysts at Bloomberg also share this opinion as they try to make reasonable estimates. They anticipate a 0.1% cut in eurozone production from July to September 2023. It will be the first considerable quarterly decline since the pandemic. A decrease in the manufacturing and services PMI of the largest eurozone economies, such as Germany and France, will affect economic growth in the region. Notably, the PMI data for the main eurozone economies was well below 50 points. As a result, Germany and France were considerably damaged by lower business activity in the key sectors.
Earlier, the risks of the economic recession in the eurozone were pronounced by Reuters. Analysts expected a 0.4% drop in the region’s GDP in the third quarter of 2023. They also assumed that the economy would resume expanding by the end of December. The key reasons for a decrease are persistent difficulties concerning manufacturing orders in the main economies of the region and the slow recovery of business activity in the services sector.