With the short contraction of the eurozone economy following an unprecedented wave of interest rate hikes, inflation in the eurozone has fallen to its lowest level in more than two years. Data show that the euro area as a whole grew 2.9 per cent over the same period in October, well below 4.3 per cent last month, moving closer to the European Central Bank ' s 2 per cent anchor target, and better than the average of 3.1 per cent forecast by economists. In a separate report, Eurostat indicated that the euro area gross domestic product (GDP) ring fell by 0.1 per cent in the third quarter, as a result of the negative effects of the interest-rate hike in the euro area, and the likelihood of falling into an economic downturn had increased, falling short of the zero growth (0 per cent increase) expected by economists.
According to data released on Tuesday, despite 10 consecutive unprecedented increases in the ECB’s interest rate, which accelerated inflation to a 2 per cent anchor, it also cost households and businesses in the eurozone, as the ECB significantly raised the cost of lending and the possibility of a technological recession in the eurozone. If the economy contracted for two consecutive quarters, it would be in line with the general “technological recession”.
In Germany, the chemical giant Basfou Corporation (BASFSE) announced earlier that day that overall sales and each share of proceeds in 2023 were expected to be at the low end of its guidance objectives, while the performance report of the French State Carrefour showed that the shoppers continued to shift to cheaper brands.
GDP data for the euro area contrasted sharply with those for the United States economy. GDP data released in the United States last week show strong growth in the United States economy between July and September, while also successfully lowering inflation levels.
The euro increased by 0.4 per cent against the United States dollar before the Federal Reserve announced its interest rate policy decision on Wednesdays of local time, while German Treasury debt maintained a small increase. Since last week, as a result of weak economic growth in some of the 20 member countries of the euro area, the rate of return on German national debt declined by 10 basis points to 2.78 per cent over the 10-year period.
“Amid rising interest rates, a slowdown in external demand and the continuing impact of energy price shocks, the eurozone economy is contracting slightly, but it has not fallen to a cliff. At the same time, the latest inflation data show that overall inflation rates have declined markedly and that wider cost pressures are retreating. Such a combination may be largely what the ECB would like to see. We expect that the possibility of a further increase this year is very low.” Bloomberg Economics Economist Jamie Rush and Maeva Cosin say.
The data released on Monday by Germany, the largest and largest economy in Europe, show that economic output contracted by 0.1 per cent in the third quarter. Germany ' s gross domestic product (GDP) has hardly been growing over the past year, and the recession is now likely to take place.
In Germany, Q3 gross domestic product (GDP) was 0.1 per cent lower than in the previous three months, but less than the 0.3 per cent expected by economists, mainly because of lower household expenditure. But economics suggests that higher consumer spending in Germany could lead to a more moderate rebound in GDP next year.
High domestic and global interest rates in Germany are seriously affecting consumer demand for industrial goods, which Germany is more dependent on for economic growth than others. The German chemical giant Lanxass AG announced a 7 per cent reduction this month, while the German car giant Volkswagen AG indicated that it would double its spending to increase the profitability of its business.
Italy, however, has just escaped a similar fate — a 0 per cent round-up, while France and Spain have achieved positive growth in GDP data in the three months to September.
Although the Russian-Uu conflict has increased energy prices on the European continent, the eurozone economy has been resilient, and the Russian-Uu conflict has so far avoided any degree of technological recession. Following the suspension last week, European Central Bank President Christine Lagarde argued that economic output in the eurozone was currently weak.
Lagarde said in Athens: “The economy may continue to weaken for the rest of the year.” “The economy should be more robust in the coming years as inflation falls, real household income picks up further, and market demand for eurozone exports picks up.”
However, despite the deteriorating economic context, Ragadeh again stressed that it was too early to talk about a reduction in interest rates to boost economic activity, while European Central Bank officials generally stated that the fight against inflation had not been completed. The current market bets on the ECB will follow the Fed’s hawk stance of hawk, with deposit rates expected to remain at 4 per cent at least until April.
While a sharp rise in borrowing costs could bring the eurozone’s price rise back to the ECB’s target level around 2025, the fall in core inflationary pressure indicators for food and energy may not be as fast. In October, the core inflation rate decreased slightly to 4.2 per cent, from 4.5 per cent last month.
Data from the Eurozone Procurement Managers Survey show that manufacturing output remained equally low at the beginning of the quarter, and private sector activity data suggest that the region ' s economy may be in a more moderate recession.
However, the outgoing President of the Italian Central Bank, Ignazio Visco, stated that the ECB’s decision to maintain high interest rates was correct. He stated in Rome on Tuesday that such action “has struck the right balance between too much and not enough”.