Eurozone Economy Enters Contraction Amid Middle East War Impact
The eurozone's economy fell into contraction in April for the first time in 16 months, driven by the Middle East conflict pushing up energy costs and causing supply shortages. Business activity in Europe is now declining while inflation remains elevated.
Economic Decline
The war in the Middle East has caused the first fall in European business output in 16 months in April and sent prices surging, closely watched survey data showed today. April's PMI data signaled a 0.1% decline in the eurozone's gross domestic product in the second quarter.
Supply Chain Pressures
"The eurozone is facing deepening economic woes from the war in the Middle East," Chris Williamson, a senior economist at S&P Global, said in a statement. "The conflict has pushed the economy into decline in April, while driving inflation sharply higher. Looking ahead, increasingly widespread supply shortages threaten to hurt economic growth further and push prices higher still."
Policy Response
The latest Purchasing Managers' Index for the 21 countries that use the euro, based on surveys of executives in the manufacturing and service sectors, follows Wednesday's announcement of emergency measures planned in the broader European Union to cushion the economy from soaring energy costs.