Eurozone Recession Looms as Consumers Cut Spending amid Rising Prices

A survey released on Friday showed the slowdown in economic activity throughout the euro zone has accelerated in September and that the economy is likely entering a recession as consumers cut spending in response to rising cost of living.

S&P Global Flash Eurozone PMI dipped to 48.2 in September, down from 48.9 in August, as predicted by a Reuters poll. September was the third consecutive month with growth below the 50 threshold distinguishing expansion from contraction.

The rising cost of living and increased concern about future prospects led to worsening performances in both manufacturing and services, the note published on Friday said.

Rising energy prices have increased businesses’ cost burdens and have hindered production in some cases, driving up survey price gauges and indicating fresh acceleration of inflationary pressures.

“A eurozone recession is on the cards as companies report worsening business conditions and intensifying price pressures linked to soaring energy costs,” said Chris Williamson, chief business economist at S&P Global.

“Although there were some signs of supply chain constraints easing, the focus of concern has clearly shifted away from supply chains to energy and the rising cost of living, which is not only hitting demand but also limiting manufacturing production and service sector activity in some cases.”