Eurozone economy shrinks as inflation falls further

BRUSSELS, Belgium (AFP) – The eurozone economy shrank slightly in the third quarter, hurt by the European Central Bank's painful rate-hiking campaign, but inflation slowed to its lowest level in more than two years, data showed Tuesday.

The EU'S official data agency said the 20-country single currency zone's economy contracted by 0.1 percent over the July-september period, after recording only 0.2 percent growth in the second quarter.

Consumer price inflation in the eurozone has slowed to 2.9 percent, Eurostat data for October showed Tuesday, the lowest rate since July 2021 when it reached 2.2 percent.

The figure is down from 4.3 percent in September and lower than predicted by analysts who had expected inflation to remain above three percent.

The data reflects the difficulties facing the eurozone including the cost-of-living crisis and concerns over the flagging demand in the global economy.

Although the eurozone has weathered the shocks from the coronavirus pandemic and the war in Ukraine, fears are growing over the economic effects of the Hamas-israel war.

The inflation rate is, however, now closer to the ECB'S two percent target. Despite higher borrowing costs, the ECB remains steadfast behind its mission to tame red-hot inflation, and economists warned not to expect rate cuts any time soon.

But signs of weakness in the economy as well as ebbing price pressures prompted the ECB to leave interest rates unchanged earlier this month after raising them in each of their previous 10 meetings.

After the figures were published, Tomas Dvorak, senior economist at Oxford Economics, said the ECB could start cutting rates as early as April.