Eurozone has been suffering from continuous contraction for two consecutive quarters

At a time when expectations were that indicators of economies entering a wave of recession would end, recent European data raised new concerns about the actual onset of recession, as the European economy contracted hardly at the end of last year and early 2023.

Adjusted statistics showed that the economic growth of the 20 countries that use the euro currency recorded "zero" to negative 0.1 percent for the fourth quarter of 2022, as well as for the first three months of 2023, from a very slight growth of 0.1 percent to negative 0.1 percent.

This means that the euro zone suffers for two consecutive quarters of declining production, which is one of the definitions of recession. Despite the recession, the European currency markets have held up relatively well. Unemployment has reached its lowest level since before the establishment of the euro zone in 1999, recording 6.5 percent during trading. last April.

The latest statistics issued by Germany also showed that the largest economy in Europe contracted unexpectedly in the first three months of this year, marking the second quarter of contraction, but Goldman Sachs revealed in a recent research note that the possibility that the United States would enter a recession. During the next year, it has become less than expected, and according to the bank’s analysts, these positive expectations are due to two reasons. The first is the congressional approval of the debt ceiling agreement of the two parties, the Democratic and the Republican, and the stress that the banking sector expects only a slight growth in the gross domestic product this year.

The second reason is that the United States has become more confident in its estimates of achieving real GDP growth this year, as the share prices of regional banks have stabilized and deposit inflows have slowed.

Analysts at the investment bank indicated that most of the news in the labor market remained positive, explaining that for more than a year the United States managed to create “large numbers of jobs while maintaining the unemployment rate very close to the pre-pandemic level” of about 3.5 percent.

Winter 2024 looks more dangerous in Europe

And in line with the pressures of high interest rates that come in the context of the war on inflation, the difference between natural gas prices in Europe for this winter and next winter continues to widen, which reflects a decline in risks in the near term, but with an increase in the future surrounded by uncertainty.

Futures contracts for the month of December (December) 2023 are trading at a discount of about eight percent compared to their counterpart for the month of December 2024, according to “ICE Index” data, and this is a reflection of what it was in January (January), when contracts were traded at a price premium.

This shift indicates that Europe is relatively ready for the upcoming heating season after a mild winter this year, which allowed it to build up stocks with the flow of liquefied natural gas to the old continent.

According to Bloomberg, the coming years are more uncertain, as the region is trying to adapt to a new reality in which it does not depend on its former largest resource, Russia, due to its war in Ukraine, which led to the collapse of relations with the West.

Nick Campbell, an executive at consultancy Inspired Energy, believes that next year's winter "is looking more dangerous" and it will be too early to benefit from additional flows of LNG from the United States.

He explained that the weather cannot remain mild forever, noting that the cold winter this year could reduce storage balances before next summer.

The gas transfer agreement between Moscow and Kiev is also set to expire in December 2024, and this adds a risk to the remaining Russian flows to Europe that come through Ukraine, and high gas prices would hinder Europe's efforts to combat inflation, and the high cost last year hindered it. Industrial activity and reduced demand for fuel.

Inflation is declining, but remains a cause for concern

At the same time, the International Monetary Fund urged central banks to continue the path of tightening monetary policy and continue to combat inflation, and Julie Kozak, a spokeswoman for the Fund, said in statements to reporters that the momentum of inflation has slowed in the United States, but it remains a source of concern, adding that if it appears that inflation is more firmer than expected, the Federal Reserve may need to raise interest rates for a longer period.

"We see challenges in the medium term for the global economy, and this requires measures from policymakers now," she added, adding, "We believe that central banks should continue on the path of monetary tightening to decisively reduce inflation."

These statements about the US economy came in the wake of the IMF's periodic review of US policies, indicating continued concern about inflation risks.