Automotive Exports December 2022

Winter eurozone recession looms as inflation hangs on
The eurozone economy will slide into
recession over the winter and will
grow less than expected next year, the
European Union’s executive commission
said.The warning comes as peak inflation
hangs on for longer than expected
and high fuel and heating costs erode
consumer purchasing power.
High energy prices, the rising cost of
living, higher interest rates and slowing
global trade “are expected to tip the EU,
the euro area, and most member states
into recession in the last quarter of the
year,” the forecast highlighted.
The growth forecast for all of 2023 was
lowered to 0.3% from the 1.4% expected
in the previous forecast from July.
“The EU economy is at a turning
point,” said Paolo Gentiloni, European
commissioner for the economy.
“After a surprisingly strong first half of the
year, the EU economy lost momentum in
the third quarter and recent survey data
point to a contraction for the winter,” he
told reporters in Brussels. “The outlook
for next year has weakened significantly.”
The worst performer next year is likely to
be Germany, Europe’s largest economy
and one of the most dependent on
Russian natural gas before the war in
Ukraine. Germany was expected to see
the output shrink by 0.6% over the next
year.
Gas and electricity prices have soared as
Russia has dialed back supplies to Europe
to a mere trickle of what they were before
the invasion of Ukraine. European officials
say the cutbacks are energy warfare by
Russia to punish EU member countries
for their support for Ukraine, while
state-owned supplier Gazprom has cited
technical reasons and a refusal by some
customers to pay for gas in rubles.
Inflation will peak later than expected,
near the end of the year, and will lift the
average rate to 8.5% for 2022 and to
6.1% for 2023 in the eurozone. That is an
upward revision of nearly 1 percentage
point for 2022 and over 2 points for 2023.
Two consecutive quarters of falling output
is one common definition of recession,
although the economists on the eurozone
business cycle dating committee use a
broader set of data including employment
figures.
“We are approaching the end of a year
in which Russia has cast the dark shadow
of war across our continent once again,”
Gentiloni said.
But apart from the expected technical
recession, the eurozone’s unemployment
rate, aggregated deficit, and debt or
the current account balance will not
deteriorate much, if at all, the forecasts
showed. The commission indicated that
the job market was likely to hold up
relatively well despite shrinking output
over the winter, forecasting an increase
in the unemployment rate from 6.8% this
year to 7.2% next and a decrease to 7% in
2024.
“The EU economy has shown great
resilience to the shockwaves this has
caused. Yet soaring energy prices and
rampant inflation are now taking their
toll and we face a very challenging period
both socially and economically,” Gentiloni
added.
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