# Euro zone downturn deepened in Oct, winter recession likely -PMI
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-11-04
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Euro Zone Heading for Winter Recession Due to High Inflation
Meta Description: Euro zone business activity contracted last month at the fastest pace since late 2020 as high inflation and fears of an intensifying energy crisis hit demand.
URL: https://financedigest.com/euro-zone-downturn-deepened-in-oct-winter-recession-likely-pmihtml

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LONDON (Reuters) – Euro zone business activity contracted last month at the fastest pace since late 2020 as high inflation and fears of an intensifying energy crisis hit demand, according to a survey suggesting the bloc is heading for a winter recession.

Inflation in the 19 countries using the euro surged more than expected last month, reaching 10.7% and more than five times the European Central Bank’s target, so the ECB is likely to press ahead with more interest rate rises and add to the burden faced by indebted consumers.

S&P Global’s final composite Purchasing Managers’ Index (PMI) for the euro zone, seen as a good guide to economic health, fell to a 23-month low of 47.3 in October from September’s 48.1, albeit just above a preliminary 47.1 estimate.

Anything below 50 indicates contraction.

After a weak third quarter of PMI and official GDP data, the latest survey results for the start of the fourth quarter suggest the euro zone [economy is now headed for a winter recession,”](https://www.financedigest.com/german-economy-expected-to-skirt-recession-economy-ministry-report.html "German economy expected to skirt recession – economy ministry report") said Joe Hayes, senior economist at S&P Global Market Intelligence.

High [inflation is dampening demand](https://www.financedigest.com/aussie-supermarkets-set-to-capitalise-on-high-inflation-but-softer-demand-ahead.html "Aussie supermarkets set to capitalise on high inflation, but softer demand ahead") and hurting business confidence. Fears that the [energy crisis](https://www.financedigest.com/europes-spend-on-energy-crisis-nears-800-billion-euros.html "Europe’s spend on energy crisis nears 800 billion euros") could intensify over the winter period are also feeding uncertainty and weighing on decision-making.

The new business index fell to 45.0, from 46.3 in September, its [lowest reading since](https://www.financedigest.com/uk-mortgage-approvals-hit-lowest-since-june-2020.html "UK mortgage approvals hit lowest since June 2020") November 2020.

A PMI [covering the bloc’s dominant services industry nudged down to a 20-month low](https://www.financedigest.com/monte-dei-paschis-cash-call-93-covered-so-far-despite-low-shareholder-take-up.html "Monte dei Paschi’s cash call 93% covered so far despite low shareholder take-up") of 48.6 from 48.8, although above the 48.2 flash estimate.

High operating expenses due to energy, wages and transport costs pushed [services firms to raise](https://www.financedigest.com/decline-in-german-services-sector-eases-raising-hopes-for-milder-recession-pmi.html "Decline in German services sector eases, raising hopes for milder recession -PMI") charges sharply again. The output prices index was 62.7 compared to September’s 63.2, the fifth highest reading in the survey’s 24 [year history](https://www.financedigest.com/explainer-international-womens-day-date-history-and-this-years-theme.html "Explainer-International Women’s Day: date, history and this year’s theme").

October PMI data suggest inflationary [pressures remained extremely elevated across the euro](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure") zone,” Hayes said.

A substantial worsening of economic conditions in the coming [months may give](https://www.financedigest.com/spain-august-12-month-inflation-slows-to-10-4-yoy-oil-gives-a-break.html "Spain August 12-month inflation slows to 10.4% YoY; oil gives a break") policymakers a difficult decision to make with regards to the path of monetary tightening, for fear of being too aggressive and prolonging the downturn.

[(Reporting by Jonathan Cable; Editing by Susan Fenton)](https://www.financedigest.com/cable-cars-and-ropeways-market-report-size-growth-demand-scope-opportunities-and-forecast-2016-2026-fmi.html "Cable Cars and Ropeways Market Report | Size, Growth, Demand, Scope, Opportunities and Forecast 2016-2026: FMI")


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