Eurozone business activity collapses in March due to pandemic

The economic output is slumping at a rate that far exceeds the worst moments of the financial crisis or the euro debt crisis

Eurozone business activity has crumbled in March as the Covid-19 pandemic sweeping across Europe and the world wreaks havoc and shops, restaurants and offices pull down the shutters, a survey by IHS Markit showed today. Its Euro Zone Composite Flash Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, tumbled to a record low of 31.4 this month from February’s 51.6, marking by far its biggest one-month fall since the survey began in mid-1998. 

“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.”

All subindexes in the survey came in under the 50 mark separating growth from contraction, with new business hit particularly hard - that index sank to a record low of 29.5 from 51.2. Activity in the bloc’s dominant services industry also contracted at the steepest rate in the survey’s more than two-decade history. Its PMI nose-dived to 28.4 from 52.6, below all forecasts in the Reuters poll. Firms turned to cutting prices for the first time in over three years and optimism also tumbled to a survey low. The business expectations index stood at 34.8 compared with last month’s 61.3.

“Employment is already falling at a rate not seen since July 2009 as despair about the outlook broadens. Business sentiment about the year ahead has plunged to the gloomiest on record, suggesting policymakers’ efforts to date have failed to brighten the darkening picture,” Williamson said.

In what can be seen as almost good news, factories were less badly impacted, with the manufacturing PMI dropping to 44.8 from 49.2 - its lowest since July 2012 but above expectations. Yet, the new orders index was 38.2 compared with 49.4 last month, a near 11-year low, due to cut staff,  reduced raw material stocks and completed backlogs of work.

"Demand for many goods and services has fallen dramatically, while near-record supply chain delays have stymied production and business closures mean an increasingly large proportion of the economy is being mothballed," he added

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