Eurozone recession alert as slump deepens

A DEEPENING slump in the eurozone economy has triggered warnings of recession, amid resurgent inflation in Germany and France.

The euro area’s economic downturn continued last month, according to a closely watched survey of private sector purchasing managers, deepening a decline that began in June.

A composite measure of activity in the services and manufacturing sectors remained unchanged at 47.6, the seventh month it has been below 50. Any figure below this level signals contraction of activity. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said: “The composite PMI, a reliable indicator of overall economic performance, is sounding the recession alarm for the eurozone.”

The survey of purchasing managers showed that the eurozone’s performance was dragged down by its largest economies, France, Germany and Italy.

The protracted slump comes as inflation in Germany jumped to 3.8pc in the year to December. It reflects the fact that the German government footed the bill for households’ energy bills in December 2022. The lack of support last month made bills much higher by comparison. Price pressures are expected to ease over the coming year. However, Carsten Brzeski, at Dutch bank ING, warned that green taxes risked stoking inflation further.

An increase in CO2 emissions pricing, as well as new plastic and flight levies, means inflation risks are “clearly tilted to the upside”.

Mr Brzeski added: “This reacceleration of inflation strengthens the stance of keeping a very steady hand and not rushing into any rate cut decisions.”

France also had a bounceback of inflation in December, with the rate rising from 3.9pc in November to 4.1pc last month amid an increase in energy and services costs.