Confidence in the euro zone collapses due to fears of recession and energy crises

Confidence in the euro-zone economy has fallen to its weakest level in almost 1.5 years as energy shortage fears dogged consumers and businesses and the European Central Bank’s first rate hike in more than a decade fueled concerns that a recession was looming .

The figure compiled by the European Commission fell to 99 in July from 103.5 in the previous month. That’s well below the 102 level that economists had been expecting.

Consumer confidence led the drop, falling to its lowest level on record as households grew concerned about the outlook. Fears of an impending economic contraction grew in 11 of the 19 eurozone countries, reaching their highest level since the outbreak of the Covid-19 crisis.

Optimism also declined across all sectors surveyed, with significant declines in manufacturing and services alongside milder declines in retail and construction.

Europe is nervous as the Kremlin limits natural gas supplies in response to Western sanctions over its invasion of Ukraine. A full shutdown risks energy rationing, which could curb production at industrial firms. Even before winter arrives, economic growth slowed sharply in the second quarter, data expected on Friday will show.

The eurozone is already sliding into a recession that will last until the end of the year, according to Goldman Sachs, whose economists cite the end of the post-lockdown services recovery and political upheaval in countries like Italy.

Inflation, meanwhile, was less of a concern for consumers, Thursday’s release said. Their expectations for price developments fell to their lowest level since the start of the war in Ukraine, although inflation is likely to have hit a new all-time high this month.

In response, the ECB ended eight years of negative rates last week with a surprise-big hike and more to come, compounding headwinds for growth. Confidence in the euro zone collapses due to fears of recession and energy crises

Fry Electronics Team

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