Europe's leading economies have slowed significantly as production declines

Growth in Europe's two largest economies slowed sharply as producers suffered from a lack of demand, increasingly tight supply chains and rising prices.

With the initial momentum from the easing of Covid-19 restrictions in Germany and France, activity figures fell more than expected in June. Manufacturing production has declined in both countries, according to S&P Global surveys.

Service providers have also been hit as a decline in activity after the momentum from the gradual abandonment of coronavirus lockdowns faded.

"Germany's economy has lost virtually all of the growth gained from easing restrictions related to the virus," S&P Global economist Phil Smith said Thursday. "But perhaps the biggest cause for concern is the widespread decline in demand."

The reports indicate that, to date, economic activity continues to be supported to some extent by the workload accumulated at the beginning of the year. But a number of challenges facing the global economy have led to fears that recession is on the horizon.

Those fears are being fanned by rising interest rates, and the European Central Bank is set to raise borrowing costs for the first time in more than a decade in July.

Against the backdrop of gloomy prospects in Germany and France, there is a slowdown in job growth as companies begin to reassess their staffing needs, according to S&P Global.