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Charting the global economy: UK and Euro area prospects deteriorate

UK and Euro area prospects deteriorate: The UK economy shrank in the most recent quarter for the first time since early 2021, which is likely the beginning of a protracted recession. The outlook for the euro area also grew gloomier due to inflationary pressures.

UK and Euro area prospects deteriorate: Key Points

  • The Federal Reserve may be able to scale down its hawkish interest-rate increases if consumer prices in the US continue to rise less slowly than anticipated.
  • The country’s two-way trade suffered as a result of China’s Covid-Zero policy and worries about the world economy.
  • For the first time since the pandemic’s last lockdown, the UK economy contracted in the third quarter as the cost-of-living issue restrained expenditure.
  • A 0.2% decrease in GDP signalled the beginning of what is anticipated to be a protracted recession.
  • The only economy in the Group of Seven that has not yet fully recovered from the pandemic is Britain.
  • According to the European Commission, the euro zone is in for a rough winter as a recession sets in, double-digit inflation sweeps the area, and the war in Ukraine rages.
  • Each of the 15 nations in the eurozone for whom the Commission published a quarterly GDP projection is expected to experience at least one three-month period of recession.

UK and Euro area prospects deteriorate: Inflation Rise

  • October saw a decline in hiring and pay growth in the UK as companies grew more cautious and the labour market cooled.
  • As consumer price increases in Norway and Denmark reached levels not seen in decades, Nordic inflation developments increased the likelihood that the region would experience an impending recession.
  • While it unexpectedly increased to a 40-year high of 10.1% in Denmark in September, Norway’s inflation suddenly advanced to 7.5% last month, the quickest rate since 1987.

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