Growth in Europe’s two largest economies has slowed sharply as producers suffer from a shortage of demand, increasingly tight supply chains and soaring prices.

Following initial support for the easing of Covid-19 restrictions in Germany and France, activity indicators fell more than expected in June. According to surveys, the production in both countries S&P Globalas well as new orders.

Service providers have also suffered as activity has cooled following support for the phasing out of coronavirus-related restrictions.

“The German economy has lost virtually all the momentum gained by easing virus-related restrictions,” S&P global economist Phil Smith said in a statement on Thursday. “But perhaps the biggest cause for concern is the general decline in demand.”

Reports indicate that economic activity is so far supported to some extent by the workload accumulated at the beginning of the year. However, the scale of the challenges facing the global economy has raised concerns about the possibility of a recession.

These concerns are fueled by rising interest rates, with the European Central Bank expected to raise borrowing costs in July for the first time in more than a decade.

In this bleak situation, Germany and France have seen slow job growth, according to S&P Global, as companies begin to reassess their staffing needs.