Euro zone faces risk of double dip recession, ECB supervisor says
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The euro zone faces the risk of a double dip recession as new economic restrictions are put in place to contain the coronavirus pandemic, European Central Bank supervisor Kerstin af Jochnick said on Thursday.
“The baseline scenario of our projections cannot be taken for granted and the possibility of a double-dip recession cannot be ruled out yet, as the new restrictions being implemented across the euro area to curb the current resurgence of COVID-19 cases will again increase uncertainty for households, corporates and banks,” she said.
A five month recovery of sentiment in the euro zone stalled in October as consumers and the services sector became more downcast about economic prospects with the increase in COVID-19 cases and restrictions, data showed on Thursday.
The European Commission’s monthly survey showed sentiment in the 19 countries sharing the euro unchanged at 90.9 points this month, beating market expectations of a drop to 89.5 points.
The survey is typically conducted in the first two to three weeks of the month, meaning they relate to the mood before this week’s announcements of lockdowns in France and Germany.
Sentiment in industry, retail trade and construction all increased in October.
However, sentiment in services, the euro zone economy’s biggest sector producing some two thirds of gross domestic product, slipped to -11.8 from -11.2.
Economists polled by Reuters had expected a fall to -14.0 points.
Sentiment among consumers fell to -15.5 in October from -13.9 points in September, in line with the flash estimate released last week.
Optimism in industry rose to -9.6 from -11.4, above expectations of an increase to -11.0.
Inflation expectations in industry improved to 0.6 from -1.3 and also rose among consumers, to 13.3 from 12.5 points in September.
