Live Markets: Stagflation knocking on Europe’s door

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23/04/2026 12:54

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STAGFLATION KNOCKING ON EUROPE’S DOOR

The stagflation alarm bells are now sounding in Europe as growth seems to be screeching to a halt while prices are rising as the Iran war takes its toll on the global economy.

Data on Thursday showed that the flash composite PMI for the euro zone fell by more than expected in April and entered contraction territory.

“The PMI surveys for April signalled that the Iran war has pushed the euro zone into another bout of stagflation,” Berenberg economists said in a note.

The dip into contraction territory confirmed their forecast that the Iran war will cause euro zone growth to stall temporarily, they added.

At the same time, the economists said, “inflationary pressures continued to strengthen, with both input costs and output prices rising at the sharpest rates in more than three years.”

That leaves the European Central Bank in a tricky spot.

While policymakers are expected to leave rates unchanged when they meet next week, pressure for them to hike rates could grow depending on how the Middle East conflict develops.

ING also flag the stagflation risk and add a bit of colour noting that the S&P website, where the PMIs are published, "temporarily couldn’t cope with the amount of traffic after the PMI release".

They said this "only illustrates how crucial this report is ahead of next week’s ECB meeting."

(Sophie Kiderlin)

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EARLIER ON LIVE MARKETS

HALF-TIME IN EUROPE: UNCERTAINTY REIGNS SUPREME CLICK HERE

FRANCE BETTER PLACED TO WEATHER ENERGY SHOCK THAN NEIGHBOURS CLICK HERE

MARKETS MUTED AS IRAN WORRIES PERSIST CLICK HERE

EUROPE BEFORE THE BELL: NERVOUS MARKETS CLICK HERE

HOW MUCH RISK CAN MARKETS SWALLOW? CLICK HERE