Economic growth in the euro zone slumped in June, a key survey showed on Thursday, as high prices thwarted the strong recovery from the deep lows of the coronavirus pandemic.
S&P Global’s closely-watched monthly Purchasing Managers’ Index (PMI) fell to 51.9 from 54.8 in May. A number above 50 indicates growth.
The slowdown, caused by a “cost of living shock,” is “the most abrupt recorded by the survey since the height of the global financial crisis in November 2008,” excluding the pandemic lockdown, said Chris Williamson, chief business economist at S&P Global.
Since the beginning of the year, the European economy has made a strong recovery from the lifting of restrictions related to the Covid-19 pandemic, which has revived tourism to countries like Spain and Greece, as well as transport.
It also benefited from household spending as consumers burned savings accumulated during many months of confinement and were able to offset the negative effects of the war in Ukraine.
But in June the “tailwind” of this backlog was “already diminishing,” Williamson warned.
The latest data “is now consistent with gross domestic product (GDP) growth of just 0.2 percent for the second quarter, compared with quarterly growth of 0.6 percent earlier in the year,” he said.
“The situation is likely to get worse in the second half of the year,” he added, raising the specter of negative growth and recession.
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