(Dec 7): Industrial production in Germany and Italy began the final quarter of the year with a stumble after France and Spain reported similar outcomes, pointing to a possible recession in the region.

Output in Europe’s biggest economy fell 0.4% in October from the previous month to the lowest level since August 2020, the German statistics office said Thursday. In Italy, production declined 0.2% from September.

While the scope of each statistics sample isn’t totally comparable, the coincidence of a downswing in both economies along with negative results in France and Spain on Tuesday highlight how weakness is emerging in hard data from around the region.

With eurozone gross domestic product already having shrunk by 0.1% in the third quarter — numbers that could be revised later on Thursday — another three-month period of contraction would mean a recession. Recent surveys signal the downturn in the euro area has continued in services and manufacturing.

For Germany, the drop in production was unexpected; the median economist prediction was for a 0.2% increase. The outcome shows how the economy is still struggling to shake off the impact of an energy-induced crisis last winter and a drop in global demand.

Manufacturers — Germany’s economic backbone — are particularly affected by expensive energy, higher interest rates and weak global demand. Several big industrial firms have started cutting costs, and chemical maker BASF SE plans to reduce investment by almost 15% over the next four years.

Data earlier this week showed that factory orders declined more than expected, further dimming the outlook for a recovery. The budget turmoil in Berlin is also weighing on Germany’s outlook.

Still, recent surveys there suggest some stabilisation. The Ifo institute’s business outlook last month reached a six-month high. A poll of purchasing managers, meanwhile, highlighted “considerable weakness,” though easing conditions support a return to growth.

Other countries are faring only slightly better. The 0.3% drop in French production during the month was due to lower output of energy and equipment goods. But manufacturing, which excludes energy, eked out a 0.1% gain.

On Thursday, Bank of France deputy governor Agnes Benassy-Quere insisted that, while growth in the country is weak, the institution isn’t anticipating a recession.

“The central scenario is that it’s really a soft landing of the global and European economies,” she said.

The 0.2% drop in Italian industrial production was better than the 0.4% declined anticipated by economists.