Eurozone: Coronavirus crisis deals historic blow to business activity in April
April 23, 2020
The Flash Eurozone Composite Purchasing Managers’ Index (PMI), produced by IHS Markit, nosedived from 29.7 in March to 13.5 in April, marking the worst result since data was first collected in July 1998. As a result, the PMI plunged further below the 50-threshold that distinguishes expanding business activity from contracting business activity in the Eurozone.
The services sector continued to be particularly hard hit by the economic disruption caused by the coronavirus outbreak, while manufacturing activity recorded a less severe but still dizzying downturn. Activity in the travel, tourism, accommodation and restaurants industries bore the brunt of the impact from the lockdown measures, with a record fall in output, new orders and employment leading the contraction in the services sector. The manufacturing PMI, meanwhile, dived further below the 50-threshold due to the worst contraction in output on record; the strongest decline in new orders in the survey’s history; and the sharpest reduction of employment on record. Unsurprisingly, firms’ expectations of future output also fell to a fresh all-time low.
Assessing the Eurozone’s two largest economies, France’s and Germany’s composite PMI slumped at the sharpest pace in the survey’s history, although Germany’s composite PMI somewhat fell less sharply than in France.
Commenting on the release, Chris Williamson, chief business economist at IHS Markit said:
“The ferocity of the slump has also surpassed that thought imaginable by most economists, the headline index falling far below consensus estimates. Our model which compares the PMI with GDP suggests that the April survey is indicative of the eurozone economy contracting at a quarterly rate of approximately 7.5%.”
Meanwhile, Bert Colijn, senior Eurozone economist at ING, offered a glimmer of hope:
“As lockdown measures across the eurozone are gradually lifted with many countries taking first small steps late April and early May, the question is how activity will pick up in the coming weeks. No one expects a quick bounce-back of activity, but some recovery from April lows would make sense as some businesses are allowed to cautiously reopen.”