Spain: Composite PMI suffers unprecedented drop in April on full Covid-19 impact
May 6, 2020
Reflecting severe contractions of both the manufacturing and services sectors induced by the Covid-19 fallout, the IHS Markit composite Purchasing Managers’ Index (PMI) crashed from 26.7 in March to an unprecedented single-digit 9.2 in April. Thus, the index plummeted further below the 50-threshold, indicating a marked retreat in business activity.
The IHS Markit Services PMI nosedived from 23.0 in March to 7.1 in April, indicating a significant, record-breaking and broad-based decline in services-sector activity. Output and new orders plunged as the lockdown measures in place for the whole of April inevitably led to a collapse in demand for services. In particular, the hospitality, and transport and storage sub-sectors were especially hit. Moreover, pessimism on the outlook among firms sank to a new survey low, which, coupled with a historic reduction in workloads, led service providers to shed jobs at a record rate since data collection began over 20 years ago. Regarding prices, both operating expenses and output charges declined, pointing at an emergence of deflationary pressures.
Similarly, the IHS Markit Manufacturing PMI also collapsed, coming in at 30.8 in April (March: 45.7)—the lowest reading since 2008-end; thus, signaling a marked deterioration in operating conditions. The downturn was driven by the impact unleashed by Covid-19, with output, new orders and exports all tumbling at the sharpest rates since data collection began in 1998. The dire scenario prompted manufacturers to reduce their workforce numbers steeply, while confidence crumbled to a new record low on a pessimistic outlook regarding the effects of the pandemic on activity and demand. On the price front, both input and selling prices fell, also pointing to a looming deflationary environment.
Author: Javier Colato, Economist