Economists at UBS have issued a report which states the Eurozone has already entered a “shallow” recession which they expect to last through the end of the year. They attributed the economic slowdown to rising energy costs which are sapping consumer’s purchasing power.

According to the report, the bloc’s economy will contract by roughly 0.1% in Q3, and 0.2% in Q4, as the report upgraded the full year outlook. The forecast for growth in 2023 was cut from 1.2% to 0.8%.

The economists wrote, “In light of further significant energy-price increases, which imply further pressure on household consumption and fixed investment, we now expect the Eurozone to suffer a technical recession.”

According to the report’s authors, the forecast was made with an assumption that gas prices will increase further but that there would be no severe shortages. If rationing were to be required, they noted, “the economic damage would likely be much worse.”

Morgan Stanley economists produced a similar outlook in their analysis, when on Thursday they predicted that the fourth quarter would see the beginning of a deeper than expected contraction in the Eurozone economy.

The analysts said, “We see a more long-lasting impact of this energy crisis into next year, as we expect higher prices and uncertainty over energy supply will persist well into the 2023-24 winter. Not all is gloomy though, and we still think a recovery will follow this weak patch, driven by a pick-up in private and public investment.”