STORY: The euro zone is likely entering a recession -- with business activity contracting at the fastest pace in nearly two years this month.

New figures out Monday (October 24) showed the cost-of-living crisis is keeping consumers cautious and sapping demand.

Factories have been particularly hard hit by energy price rises - with supply chains, still recovering from the health crisis, also taking a hit from the conflict in Ukraine.

S&P Global's euro zone flash composite Purchasing Managers' Index, seen as a good guide to overall economic health, fell to 47.1 from 48.1 in September.

October was the fourth month below the 50 mark separating growth from contraction -- and was the lowest reading since November 2020.

High energy costs meant the downturn in the German economy, Europe's largest, deepened in October.

And the rate of manufacturing contraction was at its fastest in two-and-a-half years.

Baader Bank analyst Robert Halver says markets are impatient for more action from Berlin:

"Here on the floor, the opinion is quite clear that German economic policy still has room for improvement. It is important to present a clear concept. Gas supply and electricity supply must be guaranteed to some extent. But we also have to get a grip on prices."

Concerns over rising inflation also weighed on the euro zone's second-biggest economy, France, and business activity there slowed.

In Britain, outside the European Union, businesses suffered their worst month since January 2021 when they were under a lockdown.

The country's political upheavals compounded concerns about inflation and rising interest rates.

On Monday (October 24) it was announced that former finance minister Rishi Sunak will replace Liz Truss and become Britain's third prime minister in less than two months, following one of the most turbulent periods in British political history.