The European Union and the United Kingdom may be starting to enter a recession, whether the decline is gradual or steep.
In comparison to the previous three months, the British economy contracted by 0.2% in July, August, and September, according to data released on Friday by the Office for National Statistics. By the end of the year, it was predicted that the downturn would spread to the continent.
In the final three months of 2022, several nations are likely to experience a recession, according to Paolo Gentiloni, the EU’s commissioner for the economy. “The EU economy is at a turning point. Recent survey data points to a contraction for the winter,” he said.
However, the EU expected that the 27-member bloc will experience a “short-lived and not excessively deep” recession, although central bankers in Britain have warned of a “prolonged” recession lasting up to two years.
The twin scourges of increasing prices and a sluggish or declining economy are plaguing the EU and Britain. The war and retaliatory sanctions against Russia, one of the largest producers of grain and oil, have driven up the price of food, gasoline, and fertiliser around the world.
The pandemic-related supply chain delays and ongoing COVID-19 lockdowns in China, most recently in the manufacturing powerhouse of Guangzhou, have added to the list of economic issues, as have natural disasters caused by climate change.
One metric indicates that in October, the annual inflation rate in Germany, the biggest economy in Europe, was 10.4%. Inflation in Britain rose to 10.1% in September, the highest level in 40 years, and is predicted to continue climbing before peaking.
The majority of callers to BBC call-in radio talk shows are concerned about their ability to pay for their houses’ heating and lighting.
“There is a tough road ahead,” Jeremy Hunt, the chancellor of the Exchequer, declared Friday, “one which will require an extremely difficult decision to restore confidence and economic stability.”
Preliminary estimates from the national statistics office revealed that the British slowdown affected both the production and services sectors, meaning that the nation’s gross domestic product, or total output, remained below its pre-pandemic level. Although that number was impacted by the passing of Queen Elizabeth II, which led to widespread, unforeseen business closures, the decline was particularly severe in September, down 0.6 per cent from the previous month.
After the announcement, 10-year British government bond yields momentarily fell before slightly climbing to 3.33 per cent, which was less than experts polled by a news site had predicted—they had predicted a quarterly contraction of 0.5 per cent. A recession is typically characterised by a prolonged period of severe drop in economic activity.
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