Economic confidence in the euro zone has reached its lowest level in the last year and a half, as inflation hits record after record and limited energy supplies push the region closer to a recession, reported Bloomberg, quoted by Ziarul Financiar.

The European Commission’s economic indicator fell to 97.6 in August compared to 99 in the previous month, Tuesday’s data showed. Analysts polled by Bloomberg had expected a decline to 98.

The decline in economic confidence is also felt in industry and services, as energy shortages endanger production, raise prices and reduce demand. While consumer sentiment unexpectedly rebounded in August from a record low, households are more pessimistic about the future than they were during the pandemic.

Confidence in the euro zone, at the lowest level in the last 19 months

With private sector activity down for the second straight month, some analysts say the region is already in recession. The decline is largely driven by the manufacturing industry, which is most exposed to the drop in Russian natural gas supplies. Germany, Europe’s largest economy, is particularly hard hit.

The energy crisis further stimulates inflation. Eurozone data due on Wednesday is expected to reflect yet another record high in August prices.

That has prompted the European Central Bank to raise interest rates by another half point at next week’s meeting, with some officials advocating an even steeper hike.

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