Europe Recession: Europe’s top two economies contract as bloc already in recession

Private-sector activity in the euro area’s top two economies contracted in November, painting a bleak picture for a region that’s probably already in recession.
S&P Global’s flash purchasing manager index for France dropped to its lowest level since the pandemic-related disruptions of early 2021, falling to 48.8. This was a greater decline than economists had predicted and took the figure below the 50-point threshold that separates expansion from contraction.
The German measure also showed a contraction, though the 46.4 reading was the best in three months, avoiding a further worsening predicted by analysts.

Europe is headed for a bleak winter, with the energy crisis and record inflation weighing on output. The OECD on Tuesday warned that Germany would contract 0.3% in 2023, while it lowered its forecast for French growth in gross domestic product to 0.6%.
“Although France’s manufacturing sector has been in a downturn since the start of the second half of 2022, overall economic activity levels throughout this period had been propped up by continued growth in services,” said Joe Hayes, a senior economist at S&P Global Market Intelligence. “This vital support for the economy looks to have ended.”

Weakening Demand
In Germany, Europe’s largest economy, purchasing managers at factories reported an improvement in the availability of supplies and shorter delivery times for inputs.
Still, “underlying demand continues to weaken rapidly, linked to sharp price increases and hesitancy among customers, with the downturn in service sector new business even gathering pace to the quickest since May 2020,” S&P Global Market Intelligence Economics Associate Director Phil Smith said.
PMI readings for the euro area, the UK and the US later on Wednesday are predicted to show a lack of growth in all three economies. Australian data published earlier showed the PMI index fell to 47.7 from 49.8 in October, the lowest reading since January.
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