Economy shrinks for third straight month

car production

In particular, the issue of energy and the rising cost of living are causing companies great concern.

(Photo: dpa)

Berlin Energy crisis and record inflation are slowing down the euro zone economy stronger than it has been for over a year and a half. The purchasing managers' index for the private sector - industry and service providers together - fell by 0.7 to 48.2 points in September, like the financial service provider S&P Global announced on Friday about its survey of thousands of companies.

This is the worst reading in 20 months and the third straight decline. At the same time, the barometer is well below the growth threshold of 50.

"A recession is on the cards for the euro zone given the deteriorating business situation and increasing price pressure from rising energy costs," said S&P Global Chief Economist Chris Williamson. There are signs of a noticeable downturn in many euro countries. "Germany got it the worstbecause the economy here - apart from the pandemic months - has been declining at the fastest rate since the global financial crisis," Williamson said.

Although there are signs that supply chain problems are easing, energy and the rising cost of living have been a major concern for companies. "Both of these not only affected demand, but also caused some companies to restrict industrial production and business losses in the service sector," said the chief economist.

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At the same time, the sharp rise in energy costs has fueled inflationary pressures again. "It is therefore becoming increasingly difficult for monetary policymakers to inflation while avoiding an economic hard landing," Williamson said European Central Bank (ECB)which recently raised its rates twice in a row.

Leading monetary authorities such as ECBDirector Isabel Schnabel recently emphasized that they would continue to raise interest rates despite the impending downturn. That makes loans for investments and consumption more expensive, which Economy should continue to burden.

More: German economy shrinks faster in September

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