Fears of a severe recession deepen as European business activity slows on surging energy costs

European concern enactment took different deed successful the period of October, reporting the steepest output nonaccomplishment since April 2013 excluding pandemic lockdowns.

Firms person been nether unit owed to higher inflation, peculiarly coming from vigor costs and wage pressures.

The euro zone's flash composite Purchasing Managers' Index fell to 47.1 successful October, down from 48.1 successful September. A speechmaking beneath 50 represents a contraction successful activity.

"These numbers station immoderate downside hazard to a batch of people's forecasts, notably the ECB's," Chris Williamson, main concern economist astatine S&P Global Market Intelligence, told CNBC's "Squawk Box Europe" connected Monday.

The European Central Bank said successful September that the 19-member bloc is acceptable to turn 3.1% this twelvemonth and 0.9% successful 2023. The cardinal slope besides forecast inflation astatine 8.1% this twelvemonth and astatine 2.3% successful 2024.

Manufacturing enactment led the losses, but services output besides dropped for a 3rd consecutive month.

In presumption of nationalist breakdown, concern enactment successful Germany came successful astatine 44.1, versus 45.7 successful the erstwhile month. Over successful France, enactment stagnated with a speechmaking astatine 50 from 51.2 successful September.

"The concern economically is getting worse rather rapidly," Williamson said.

Melanie Debono, elder Europe economist astatine Pantheon Macroeconomics, said that the latest information "point to a German recession, arsenic the vigor daze is progressively hitting the existent economy."

The euro mislaid crushed against the U.S. dollar and the British lb during greeting deals successful London, trading astatine $0.982 and £0.868 respectively, and pursuing the latest PMI data.

The euro has been nether unit amid a hawkish Federal Reserve and the vigor situation facing the euro portion successful the aftermath of Russia's penetration of Ukraine.

The ECB is expected to rise rates by different 75 ground points erstwhile it meets Thursday. This would beryllium the 3rd consecutive summation to the main complaint successful the euro zone, aft a 50 ground constituent hike successful July and a 75 ground constituent leap successful September.

The main complaint is presently sitting astatine 0.75%, but ECB watchers expect that further complaint hikes successful the coming months could propulsion it to astir 2% by the extremity of the year.

Sebastian Galy, elder macro strategist astatine Nordea Asset Management, said the question present is "whether the ECB tin debar a terrible recession amid an ostentation shock."

Aggressive argumentation tightening could propulsion the euro country into a recession, peculiarly arsenic user prices deed grounds levels. Euro country yearly ostentation was 9.9 % successful September, according to the region's statistic office, and the highest ever connected record.

Several economists are already pricing successful an economical slowdown earlier the extremity of the year. However, ECB subordinate Gabriel Makhlouf said past week that contempt the hazard of a recession, further complaint increases stay necessary, according to Reuters.