European PMIs confirm a movement to recession

There is a possibility of the Eurozone falling into recession due to the fastest drop in business activity in almost two years. This is because of consumer caution and reduced demand.

The overall economic health can be tracked by the S&P Global Eurozone Composite Purchasing Managers' Index (PMI), which is a good indicator. It reduced to 47.1 from 48.1 in September. It is lower than expected 47.5.

The 50 level separates growth from decline. The October figure was lower and was the lowest of four months of minimums since November 2020.

Andrew Cunningham from Capital Economics said that the sign of the eurozone falling into a rather deep recession was the PMI for October. But, according to him, pressure from inflation remains strong.

He added that the currently available analysis by countries shows that Germany is in a worse position than France.

Germany's economy is the largest in Europe. According to the high energy costs, the decrease in October was significant. Also, the reduction in production was the fastest in 2.5 years.

France represents the second largest economy in the Eurozone. Worries about rising inflation have put pressure on France as well, leading to a slowdown in business activity there.

Inflation is now almost five times greater than the target. The European Central Bank has begun raising interest rates to fight against it. It is expected to raise rates again on Thursday by 75 basis points, which is depleting the purchasing power of indebted consumers.

The PMI of the services industry fell to 48.2 from 48.8 in September, which was as expected but the lowest figure in 20 months.

The manufacturing PMI reduced to 46.6 from 48.4, its lowest level since May 2020 and below all predictions.

Factory Purchasing Managers' optimism about the coming year was pushed even further down. The index of future production reduced to 44.8 from 45.3, its lowest level since May 2020.