According to surveys released on Monday, the cost-of-living problem in the euro zone is becoming worse and people are becoming less willing to spend money.
According to the polls, price pressures did ease somewhat, but they remained strong. The European Central Bank is under pressure as a result since inflation is running at a rate that is more than four times its target of 2% and hit a record high of 9.1% last month.
In a Reuters survey conducted last week, over half of the economists asked said they anticipate the ECB raising interest rates by an extraordinary 75 basis points this week. Almost as many analysts predicted a 50 bps increase.
Despite these anticipations, the euro fell below 99 U.S. cents on Monday when Russia declared that its main pipeline carrying gas to Europe will remain closed indefinitely.
The continent’s gas prices increased by as much as 30% on Monday, fueling concerns about shortages and raising prospects for a recession and a harsh winter as businesses and people are hit hard by exorbitant energy costs.
The final composite S&P Global Purchasing Managers’ Index (PMI), a measure of the health of the economy, dropped from 49.9 in July to 48.9 in August, which was below the preliminary estimate of 49.2. Any number under 50 denotes contraction.
According to another study, investor confidence in the currency union suffered from the possibility of a recession and fell in September to its lowest level since May 2020.
The largest economy in Europe, Germany, had a decline in services activity for the second consecutive month in August as domestic demand was hampered by rising inflation and waning confidence, according to prior data.
According to a Reuters survey from last week, its economy is on course to shrink for three straight quarters starting with this one.
The services sector in France, the second-largest economy in the euro zone, lost additional steam and could only muster modest growth, with purchasing managers expressing concern about the future.
While Spain’s economy grew at its slowest pace since January, the services sector in Italy resumed moderate growth as businesses feared inflation would hurt their earnings and client demand.
According to the UK’s PMI, the economy finished August on a far weaker basis than previously believed as total business activity fell for the first time since February 2021, sending a blatant warning of a recession.
Who will be the nation’s new prime minister, entrusted with trying to manage an economy facing a protracted recession combined with eye-watering inflation and industrial unrest, will be announced later on Monday.
Surveys in Asia revealed that a robust recovery in China’s services sector moderated marginally amid new COVID-19 flare-ups, while the sector shrank for the first time in Japan.
However, the country’s main services sector expanded last month more quickly than anticipated as a result of strong demand growth and ongoing cost pressure relief.
