Stagflation alarm bells ring in the euro zone as energy crunch hits the global economy
Economists warn stagflation — high inflation and stalling growth — is facing the region because of the Iran war.
TL;DR
- Euro zone private sector output reached a 10-month low in March, falling to 50.5 on the S&P Global flash PMI.
- The decline is attributed to the Iran conflict, which is causing surging energy prices and supply chain disruptions.
- Firms' costs are rising at the fastest rate in over three years, with supplier delays reaching their highest since mid-2022.
- Euro zone companies have scaled back hiring and lowered output expectations.
- There are fresh warnings of stagflation, a combination of high inflation, unemployment, and stalling growth.
- The energy price shock could negatively impact business profitability and damage demand conditions.
- European Central Bank forecasts for economic growth and inflation may be optimistic given the current situation.
- European Commission President Ursula von der Leyen called for negotiations with Iran to address the critical global energy crisis.