Business growth in the euro zoneslowed further last month, a survey showed .Forward-looking indicators suggest the region could slip into recession this quarter as the cost of living crisis keeps consumers on their toes.
The final S&P Global Purchasing Managers' Index (PMI), seen as a guide to good economic health, fell to a 16-month low of 52 in June from 54.8 in May.
This was slightly higher than the preliminary estimate of 51.9.Over 50 means growth.
"The sharp deterioration in growth in business activity in the euro zoneraises the risk of a third-quarter downturn in the region," said Chris Williamson, chief global business analyst at S&P .
"Manufacturing is already in decline for the first time in two years," he said. "Amid the cost of living crisis, growth in the services sector has weakened significantly."
Household spending on non-essential goods and services has come under particular pressure due to soaring prices."
The PMI index, which covers theeuro zone's main services sector, fell to 53 from 56.1, although it was slightly above the forecast value of 52.8.
Manufacturing production fell in June for the first time since the first wave of the coronavirus pandemic two years ago, a factory purchasing managers' index released last week showed.
Meanwhile, the services sector output price index remained near an all-time high of 63.2, down from 64.6 in May, despite easing inflationary pressures last month.
Euro zone inflation was 8.6 percent last month, more than four times the ECB's 2 percent target, official data released on Friday showed.
The European Central Bank has lagged many of its central bank peers in exiting ultra-easy monetary policy, but it has said it will start raising interest rates this month.A recent Reuters poll forecast a 25 basis point rate hike in July and another 50 basis points in September.
The composite index of new businesses fell to 50 from 53.3, the lowest level in more than a year, suggesting the economy won't pick up quickly this month.
"As a result, the June PMI data showed a growing risk of the economy slipping into a recession, while inflation pressures were moderate but still elevated," Williamson said.
