# Euro zone likely heading into mild recession-PMI
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-12-05
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Euro Zone Business Activity Declines for Fifth Month - PMI Data
Meta Description: Euro zone business activity declined for a fifth month in November, indicating a mild recession due to decreased consumer spending. Get the latest PMI data and
URL: https://financedigest.com/euro-zone-likely-heading-into-mild-recession-pmihtml

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LONDON (Reuters) – Euro zone business activity declined for a fifth month in November, suggesting the economy was sliding into a mild recession as consumers cut spending amid surging inflation, a survey showed.

S&P Global’s final composite Purchasing Managers’ Index (PMI) for the euro zone, seen as a good guide to economic health, nudged up to 47.8 in November from October’s 23-month low of 47.3, matching a preliminary estimate.

Anything below 50 indicates contraction.

A fifth consecutive monthly falling output signalled by the PMI adds to the likelihood that the [euro zone](https://www.financedigest.com/euro-zone-consumers-more-optimistic-on-inflation-ecb-survey-shows.html "Euro zone consumers more optimistic on inflation, ECB survey shows") is sliding into recession,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

However, at present the downturn remains only modest, with an easing in the overall rate of contraction in November means so far the region looks set to see [GDP](https://www.financedigest.com/german-gdp-contracted-by-0-4-in-the-fourth-quarter.html "German GDP contracted by 0.4% in the fourth quarter") contract by a mere 0.2%.

Economists gave a median 78% chance of a [recession in the bloc within a year](https://www.financedigest.com/uk-to-avoid-recession-this-year-but-outlook-still-weak-bcc-says.html "UK to avoid recession this year but outlook still weak, BCC says") in a Reuters poll last month and predicted the economy would contract 0.4% this quarter.

With demand falling again and scant prospect of an imminent turnaround firms [scaled back](https://www.financedigest.com/mifid-ii-why-you-should-not-scale-back-your-implementation-efforts.html "MIFID II: WHY YOU SHOULD NOT SCALE BACK YOUR IMPLEMENTATION EFFORTS") on hiring – the employment index slipped to 51.8 from 52.5. Unemployment in the region dipped to 6.5% in October, official data showed on Thursday.

A PMI covering the bloc’s dominant services industry nudged down to 48.5 from 48.6, its lowest reading [since early](https://www.financedigest.com/first-quarter-dash-for-cash-largest-since-early-2020-bofa.html "First quarter ‘dash for cash’ largest since early 2020 -BofA") 2021 and below the preliminary 48.6 estimate.

Still, the input and output prices index both fell suggesting inflationary [pressures may have already peaked](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"), likely welcome news to policymakers at the European Central Bank. The [output prices](https://www.financedigest.com/oil-prices-take-a-breather-opec-sticks-to-output-plans.html "Oil prices take a breather, OPEC+ sticks to output plans") index was a 3-month low of 62.3.

Inflation in the bloc was a lower-than-expected 10.0% in November, official preliminary [data showed last week](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week"), still five times the ECB’s 2% target.

The central [bank has been raising interest rates to try and tame price rises](https://www.financedigest.com/sterling-rises-as-receding-bank-sector-worries-lift-sentiment.html "Sterling rises as receding bank sector worries lift sentiment") and is expected to add another 50 basis points later this month.

With the surveys also bringing signs of inflation having peaked, the headwind on demand from rising [prices should also start to ease](https://www.financedigest.com/euro-zone-inflation-eases-in-feb-but-core-prices-pick-up.html "Euro zone inflation eases in Feb but core prices pick up") in coming months, barring severe weather over the winter, hinting that any recession may be both brief and relatively mild,” Williamson said.

(Reporting by Jonathan Cable; Editing by Toby Chopra)


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