According to forecasters, economic growth in the euro area has stagnated or even contracted in the third quarter as a result of the cumulative effects of successive increases in interest rates.
Of the 29 economists surveyed, with the exception of four, it is expected that, following a brief economic expansion in the second quarter, the data released on Tuesday will show that GDP either stagnated or contracted. Another report is expected to show a marked weakening of inflation in October.
The President of the European Central Bank, Christine Lagarde, warned this month that, after 10 hikes, the financial environment would be tightened as never before. She was informed earlier this week that she had indicated to EU leaders that the eurozone economy was at risk of stagnation and downside risks in the coming quarters.
This is more positive than the Barclay economist ' s prediction that the region could fall into recession.
“The monetary tightening is being strongly carried out, and we have yet to see it come to an end”, Silvia Ardagna, Director of European Economic Research at Barclays, said on Wednesday, “We believe that the core inflation rate and the overall inflation rate will fall to 2 per cent faster than the ECB expected, because we predict much weaker economic activity.”
Economists believe that the third quarter has the most toll on the eurozone economy in Germany, which will publish GDP data on Monday, as well as Austria and Belgium. The French and Italian data released the following day may indicate a marginal economic expansion.
Economic research perspective:
“In view of the weakening of growth and the downward trend in risk, the likelihood of a further increase this year is now very low.”
— Chief European Economist Jamie Rush
If eurozone data show a contraction, as expected by Bloomberg ' s immediate projections, this will be the first such decline in GDP since the outbreak of the new coronary outbreak in 2020. If stagnation occurs, it will confirm that the economy has grown in only one quarter of the past four quarters.
Next week's report may still give some encouragement to ECB policymakers – inflation is expected to slow significantly. The overall inflation rate is expected to be 3.1 per cent, up from the target of 2 per cent. Core prices, excluding volatile factors such as energy, increased even more, at 4.2 per cent in October.
In terms of both inflation and economic growth, the war in the Middle East is becoming a growing concern for officials.
“We are very concerned about the potential economic consequences of this, whether direct or indirect, on energy prices or the level of confidence that economic actors will continue to demonstrate”, Lagarde said on Thursday.