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News ID: 108202
Publish Date : 24 October 2022 - 21:58
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Germany Headed for Recession

BRUSSELS (AFP) -- Economic activity in the eurozone plummeted further in October and Germany, the EU’s top economy, looks headed for a recession, a closely watched survey showed Monday.
The S&P Global Flash Eurozone purchasing managers’ index (PMI) fell to 47.1 for October, down from 48.1 a month earlier, as soaring inflation and high energy prices buffeted Europe.
A reading below 50 signals an economic contraction.
While the 19-nation eurozone looked likely to contract in the fourth quarter, the picture was worse in Germany, where the PMI dropped to 44.1, from 45.7 in September.
That was the lowest reading since the first business shutdowns in Germany when the COVID-19 pandemic hit.
The data adds “to the growing signs of an impending recession in the eurozone’s largest economy,” S&P Global Market Intelligence economics associate director Phil Smith said.
Both manufacturing and services in Germany were showing accelerated rates of shrinkage, though that had yet to feed through into jobs-shedding, the survey showed.
German businesses were “deeply pessimistic” about the year-ahead outlook.
In France, the second-biggest economy in the EU, the economy is stagnating, with a PMI of 50 compared with 51.2 in September.
Although France is suffering less than other countries in Europe from rising inflation, rising prices are still putting pressure on consumers, leading to a severe fall in factory orders.
Across the eurozone, the PMI indicated that factory output had dropped for the fifth consecutive month, at a rate unseen since the worst of the pandemic.
Supply congestion and shortages had eased a bit, against a backdrop of flagging demand. While input demand had slumped, rising energy bills and wage pressure kept costs high.
A eurozone-wide recession “is looking increasingly inevitable,” S&P Global Market Intelligence chief business economist Chris Williamson said.
“The region’s energy crisis remains a major concern and a drag on activity, especially in energy intensive sectors.”
The PMI data came ahead of a Thursday meeting of the European Central Bank’s governing board that is expected to deliver a big interest rate cut in a bid to cool inflation.
Inflation in the 19-nation eurozone stood at nearly 10 percent in September, five times the ECB’s target of two percent.
The German economy, whose energy-hungry industries relied heavily on Russian gas before the war, is now forecast to shrink by 0.4 percent in 2023.

will stabilize the economy and the political situation -- though it’s hard to work out at this point which is the harder task,” said AJ Bell financial analyst Danni Hewson.
“As well as the recovery in sterling and the reduced cost of government borrowing (as yields drop), Sunak will be pleased to see European gas prices” falling.
However, with UK inflation at a 40-year high above 10 percent, the Bank of England is set to unveil another bumper interest-rate hike at a regular policy meeting next week.
This will heap further pressure on borrowers, including homeowners who have seen mortgage rates surge in the wake of the government’s costly budget.
Shevaun Haviland, director general of the British Chambers of Commerce, urged Sunak to also help out businesses struggling with huge energy bills.
“The political and economic uncertainty of the past few months has been hugely damaging to British business confidence and must now come to an end,” she said in a statement after Sunak’s new position was confirmed.
“The new prime minister must be a steady hand on the tiller to see the economy through the challenging conditions ahead.
“This means setting out fully costed plans to deal with the big issues facing businesses; soaring energy bills, labor shortages, spiraling inflation, and climbing interest rates.” 

University Staff Vote to Strike

More than 70,000 staff from British universities have voted to strike in a dispute over pay, a trade union in further and higher education representing academics and support staff said on Monday.
The University and College Union (UCU) said it now has a mandate to deliver strike action at practically every university in the UK.
The latest announcement adds to growing industrial unrest across Britain, with rail workers, health staff and legal professionals striking or planning strikes to demand better pay and conditions.
UCU said the staff voted across two separate ballots, one for pay and working conditions and the other for pension, both of which secured above 80% votes in favor of a strike action.
The union has now asked vice chancellors of the universities to enter into negotiations to make improved pay offers in order to avoid disruptions.

 

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