Eurozone: Business activity crumbles at sharpest pace on record in March
March 24, 2020
The Flash Eurozone Composite Purchasing Managers’ Index (PMI), produced by IHS Markit, nosedived from 51.6 in February to 31.4 in March, marking the worst result since data was first collected in July 1998—including the lows during the global financial crisis. As a result, the PMI plunged well below the 50-threshold that distinguishes expanding business activity from contracting business activity in the Eurozone.
The details of the release showed that the services sector bore the brunt of economic disruption caused by the coronavirus outbreak, while manufacturing activity recorded a less severe but still dizzying downturn. Activity in the travel, tourism and restaurants industries plunged, with a record fall in output, a sharp decline in new orders and the steepest reduction in employment since May 2009 leading the contraction in the services sector. The manufacturing PMI, meanwhile, dived further below the 50-threshold due to the worst contraction in output since April 2009; the strongest decline in new orders in almost 11 years; and a marked reduction in employment. Unsurprisingly, firms’ expectations of future output also fell to an all-time low.
Assessing the Eurozone’s two largest economies, France’s composite PMI slumped at the sharpest pace in close to 22 years, while Germany’s composite PMI fell less sharply than in France, although the downturn was still severe nonetheless.
Commenting on the release, Bert Colijn, senior Eurozone economist at ING said:
“These numbers give a sense of the very sharp downturn we're undergoing, but it’s still anyone’s guess how deep this actually is. The question is how much policy makers can soften the blow. Perhaps most relevant is how much unemployment and bankruptcies can be avoided to determine the possible steepness of a recovery. A lot has been done quite quickly including historic action from the European Commission and ECB, but the key question now is how long restrictive measures remain in place to get a sense of how fast the economy can bounce back.”