Business activity has crashed to a record low in the eurozone as the coronavirus pandemic fuels a global economic crisis, according to a closely watched survey.
The IHS Markit flash composite purchasing managers’ index for the eurozone plunged to 31.4 in March from 51.6 in the previous month. This is the lowest reading since the series began in the late 1990s and suggests the bloc is heading for a deep recession as the drastic measures introduced to contain the spread of the pandemic in Europe start to bite.
“Business activity across the eurozone collapsed in March to an extent far exceeding that seen even at the height of the global financial crisis,” said Chris Williamson, chief business economist at IHS Markit.
“Steep downturns were seen in France, Germany and across the rest of the euro area as governments took increasingly tough measures to contain the spread of the coronavirus,” he said.
IHS Markit said the survey data was “indicative of an 8 per cent annualised decline in eurozone GDP and it is unlikely that the index has hit rock bottom yet”.
The composite index is a weighted average of activity in the manufacturing and services sectors and a reading below 50 indicates that the majority of businesses reported a deterioration compared to the previous month.
The PMIs are the first widely-watched measure of the impact of the coronavirus crisis on the economy since the outbreak in the region escalated in late February. The preliminary data were based on responses collected between March 12 and 23.
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The PMI index for the eurozone’s services sector dropped to 28.4 in March from 52.6 in February, the lowest level ever recorded, pointing to a near shutdown of the domestic economy. The manufacturing sector contracted at a marginally slower pace with the corresponding index falling to 44.8, the lowest since the 2008 financial crisis.
In Germany, the composite PMI fell from 50.7 points last month to an 11-year low of 37.2 in March, its biggest fall on record.
The composite PMI for France fell from 52 points last month to a record low 30.2 in March, also its biggest drop.
In both France and Germany, the falls in business activity were steepest in services, although manufacturing companies also reported sharp drops in output.
“A striking difference from the peak of the global financial crisis is the relative outperformance of the manufacturing sector and the collapse in services,” said Kenneth Wattret, chief European economist at IHS Markit. “This reflects the different nature of the current shock.”
Vast numbers of businesses across Europe — from restaurants to carmakers and airlines — have had to shut their doors and consumers’ movements have been tightly restricted, leaving many companies in need of state support to survive the crisis.
Mr Wattret said the data confirmed “an unprecedented collapse in economic activity and an exceptionally severe recession”. He added: “The deluge of policy measures cannot prevent the devastating effects across economies of the virus and containment measures, it can merely prevent the output losses continuing.”
Olaf Scholz, the German finance minister, said on Monday the German economy would shrink by 5 per cent this year. So far the pandemic has infected more than 26,000 people in Germany and left 110 dead.
“The corona crisis is putting the functionality of the market economy to the test in many places,” Peter Altmaier, German economy minister, said in an interview with Handelsblatt on Tuesday. “Whole markets are completely breaking down.”
Berlin has announced a €156bn supplementary budget, while anticipating a €33.5bn plunge in tax revenues this year. The government will raise €150bn in extra debt and has set up a €500bn bailout fund to take stakes in stricken companies.
Paris has announced a €45bn aid package to help businesses and employees hit by the virus. France’s finance minister Bruno Le Maire has warned of a looming recession and said he was willing to nationalise large companies to protect them from bankruptcy.
The crisis has already hit consumer confidence in the eurozone, which plummeted to a five-year low this month, according to data published on Monday by the European Commission.
A separate survey of 5,000 consumers in the UK, Germany, France, Italy and Spain published on Tuesday by Morgan Stanley found that a third feared that they, or a household member, could lose their jobs this year and 45 per cent said they expected to be worse off in six months’ time.
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