The euro zone will succumb to its first recession since the pandemic, with the economy shrinking for a second consecutive quarter in the final months of the year, according to a Bloomberg survey of analysts.
The -0.1% contraction now forecast between September and December compares with the previous survey’s projection that production would remain unchanged. A slight recovery is observed in early 2024.
The weakness is led by Germany, Europe’s biggest economy, which is struggling to shake off its industrial malaise. Plagued by a budget crisis and weak global demand, the country is expected to experience a -0.2% recession in the fourth quarter – more than the initial -0.1% decline projected.
The survey results contrast with the European Commission’s November forecast, which sees the 20-nation euro area returning to growth this quarter, helped by a sharp fall in inflation and a robust jobs market.
Eurostat data on Thursday attributed the region’s recent weakness to changes in inventories, showing that household consumption remains strong. But the decline in industrial production figures served as a reminder of the region’s enduring weakness.
While a major headwind was caused by tighter monetary policy, the recent slowdown in consumer price growth surprised markets and policymakers alike, raising expectations that the European Central Bank will cut rates as early as spring.