The economic situation in Europe continues to deteriorate. Economic growth in the euro zone experienced a very sharp slowdown in the 3rd quarter, to +0.2% compared to the previous quarter. As for inflation, it accelerated in October to reach a new record (+10.7%), Eurostat announced on Monday.
The economy in the 19 countries sharing the single currency, however, held up better than expected over the period July-September despite the surge in prices fueled by the war in Ukraine, and as the risks of recession intensify in the region. The GDP of the 19 countries sharing the single currency increased by 0.2% over the July-September period compared to the previous quarter, after having already resisted better than expected in the 2nd quarter (+0.8%), according to the published figures. Monday by the European statistics office Eurostat.
The expected recession
This could only be a reprieve, however, with soaring prices continuing to accelerate amid war in Ukraine and the energy crisis and other indicators already showing a contraction in economic activity. , observe the experts.
“It is no longer a question of knowing if we are going to enter a recession, but of knowing how severe this recession will be (…) A recession this winter in the euro zone is imminent,” warned analysts from the firm Oxford Economics. In France and Spain, GDP rose 0.2% in the third quarter, after rising 0.5% and 1.5% respectively in the previous quarter, according to figures already released on Friday.
Germany strongly shaken
In Germany, where a decline in GDP was expected, the activity of Europe’s largest economy actually increased by 0.3%, while the country is one of the most affected by the energy crisis and inflation. Italy recorded growth of 0.5%, while the former government, led by Mario Draghi, forecast a “slight decline” in GDP. Good results which can be explained in particular by household consumption which remained solid this summer during the holiday period and by government support measures for demand.
However, this resilience could be short-lived: inflation in the euro zone accelerated further in October, to a new record (+10.7%). It had reached 9.9% in September (revised figure), for the 19 countries sharing the single European currency, already at its highest since Eurostat began publishing the indicator in January 1997.
The lowest inflation in France
France, which has adopted consumer protection measures, including lower fuel prices, maintained the lowest inflation in Europe in October, at 7.1%, according to harmonized Eurostat data. Germany is at 11.6%. The Baltic countries, particularly exposed to the consequences of the war in Ukraine, suffer from the highest inflation: it reached 22.4% in Estonia, 22% in Lithuania and 21.8% in Latvia.
Another shadow on the European economy: the tightening of the monetary policy of the European Central Bank (ECB), which raised Thursday, for the second consecutive time, its rates by an unprecedented magnitude of 0.75 points to fight against the inflation.