Before the ECB meeting, business confidence in the euro zone fell again, and President Christina Lagarde is expected to raise interest rates again.
European commercial activity took another hit in October, with the report saying the biggest loss of output since April 2013, excluding the pandemic lockdown.
Due to rising inflation, especially energy costs and wage pressures, enterprises have been under pressure.
Eurozone Comprehensive Purchasing Managers Index fell to 47.1 in October from 48.1 in September. Readings below 50 represent activity contraction.
"These numbers bring some downside risks to many people's predictions, especially those of the ECB," Chris Williamson, chief business economist at Standard & Poor's Global Market Intelligence, said on Monday.
The ECB said in September that the group consisting of 19 member states will grow by 3.1% this year and 0.9% in 2023. Central Bank also predicts inflation to be 8.1% this year and 2.3% in 2024.
Manufacturing activity led the decline, but service industry output also fell for the third consecutive month.
Nationwide, Germany's commercial activity was 44.1, compared with 45.7 last month. In France, activity stagnated, with readings falling to 50 from 51.2 in September.
"The economic situation is deteriorating rapidly," Williamson said. Melanie Debono, senior European economist at Macroeconomics, said the latest data "showed that Germany was in a recession because the impact of energy shocks on the real economy is getting bigger and bigger." After the release of business activity data, €3 fell against the US dollar
€8
€3 _ In early trading in London, the US dollar and pound fell, trading prices were 0.982 US dollars and 0.868 pounds respectively, and followed the latest PMI data.
The euro has been under pressure when the euro zone faces the energy crisis after the hawks Fed and the Ukrainian war.
ECB meeting
ECB is expected to raise interest rates by another 75 basis points when it meets on Thursday. This will be the third consecutive rate hike in the euro zone after 50 basis points hikes in July and 75 basis points jumped in September.
main interest rate is currently 0.75%, but ECB observers expect further rate hikes in the coming months could push it to around 2% by the end of the year. The question now is “whether the ECB can avoid a severe recession under the shock of inflation.” Radical policy tightening could push the euro zone into recession, especially when consumer prices reach record levels. According to the regional bureau of statistics, the euro zone's annual inflation rate in September was 9.9%, the highest level on record.
Some economists are already pricing the economic slowdown before the end of the year. However, according to Reuters , ECB member Gabriel Makhlouf said last week that despite the risk of a recession, further rate hikes are still necessary.
