Eurozone economy ‘stuck in the mud’ – analyst

The lingering economic downturn in the Eurozone is a sign that the bloc may spiral into recession by the end of the year, Bloomberg reported on Thursday, citing economists and private-sector activity surveys.

According to S&P Global, the purchasing managers’ index (PMI) in the region continued to shrink in November, plunging to 47.1 points, the sixth consecutive monthly reading below 50 – the threshold separating contraction from growth. The same trend was seen in both manufacturing and services.

“The Eurozone economy is stuck in the mud,” Hamburg Commercial Bank chief economist Cyrus de la Rubia told the news outlet. According to the expert, everything points to “a second consecutive quarter of shrinking GDP” after a 0.1% drop in gross domestic product in the previous quarter, which would constitute a technical recession.

The situation is especially dire in the Eurozone’s two largest economies, Germany and France, de la Rubia said, noting that both are “in the grip of considerable weakness.” While Germany’s contraction somewhat eased in November and private-sector activity shrank at a slower pace than in the previous month, the country remains “in recession territory” and its economy may return to growth no sooner than next year, the analyst predicted.

The state of affairs in France, meanwhile, was even worse, with the country’s PMI little changed at 44.5. Both manufacturing and services are suffering from weak demand, while the surge in unused business capacity triggered the first decline in private-sector employment in three years. This put the country’s economy “in a kind of a dead-end,” according to another economist at Hamburg Commercial Bank, Norman Liebke.

Inflation in both France and Germany remained far above target levels and is unlikely to decrease sufficiently enough to stop weighing on their economies in the short term, de la Rubia said.

For more stories on economy & finance visit RT's business section