Daily Management Review

The Euro Zone Economy Probably Went Into Recession In 2023


The Euro Zone Economy Probably Went Into Recession In 2023
According to a survey, factory activity in the euro zone concluded 2023 weakly, declining in December for the 18th consecutive month. The survey also showed few indications of an impending robust recovery in what is probably a recessionary economy.
The final HCOB euro zone manufacturing Purchasing Managers' Index (PMI), which is calculated by S&P Global, did slightly increase from 44.2 in November to 44.4 in December, but it still well below the 50-point threshold that divides expansion from contraction in activity.
Preliminary projections indicated no deviation from November.
An output index, which is a solid indicator of the state of the economy and feeds into a composite PMI that is expected on Thursday, decreased to 44.4 from November's final reading of 44.6, although it was still higher than the 44.1 flash estimate.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, stated that the negative trend strongly suggested a drop in the GDP of the euro zone in the most recent quarter. According to official data, the bloc's economy shrank by 0.1% in the third quarter; therefore, a drop in the second quarter would qualify as a recession.
"Amid a relentless slump in the manufacturing sector of the euro zone, the HCOB PMI has shown little improvement compared to November. It paints a bleak picture for the euro zone and would mean that the euro zone entered a recession in the third quarter," de la Rubia said.
A survey conducted by Reuters in early December predicted that the 20-nation euro zone would experience a brief and weak winter recession.
While there was a slight improvement in new order growth last month, the overall 2023 drop in new orders remained below 50. Sub-index increased from 41.5 to 42.0.
"The sluggishness of new orders echoes the gloom, retreating almost as swiftly as the previous month," added de la Rubia.
The backlogs of work index indicated that a significant portion of December's activity was devoted to finishing open orders, indicating that manufacturers do not anticipate a quick recovery. Factories reduced personnel for a seventh consecutive month.