The activity of the private sector in the euro area registered its biggest drop in the entire historical series in March as a result of the impact of the coronavirus pandemic and the containment measures implemented by governments, as reflected in the preliminary composite index of managers of purchases (PMI), which it has dropped to 31.4 points since February 51.6, the lowest level of the data since records began in 1998, which anticipates a quarterly contraction of the eurozone’s GDP of 2% and suggests a further decline as the response to the epidemic, according to IHS Markit.
The decline in activity in March has been especially significant in the services sector, whose leading PMI index stood at 28.4 points, compared to 52.6 in February, its worst reading since the beginning of the series in 1998, while the manufacturing sector has worsened its recession, with the activity index falling to 44.8 points from 49.2 the previous month, at 92-month lows, including the collapse of factory production to lows in recent years eleven years, with a PMI sub-index of 39.5 points, compared to 48.7 in February.
“Business activity across the euro area plummeted in March with an intensity that far outweighed the decline seen in the worst of the global financial crisis“Noted Chris Williamsom, chief economist at IHS Markit, for whom the March PMI indicates a quarterly GDP decline” of around 2%, “warning that this decline” may further escalate as policies are likely to be adopted. even more severe to deal with the virus in the coming months. “
In this sense, the survey indicates that, while growth had accelerated modestly in the first two months of the year, in March there were generalized problems for the activity as a result of increasingly stringent measures to contain the contagion of the coronavirus outbreak. , being the services sector the most affected in the consumer-oriented segments like travel, tourism and restaurants, while in the manufacturing sector the fall has been less severe.
In March, volumes of new orders received decreased with the greatest intensity recorded to date, as a consequence of the record drop in new orders for exports as cross-border trade flows stopped. Likewise, expectations regarding total future activity also deteriorated sharply, reaching their all-time low, with record levels of pessimism regarding the next twelve months in both the manufacturing and services sectors.
Thus, the unprecedented collapse in demand and business sentiment fueled the largest monthly cut in employment since July 2009. In the case of the services sector, employment has been destroyed at the most intense rate since May 2009, while in The manufacturing sector has cut its workforce with an intensity that has not been seen since July 2012.
“Demand for many products and services has dropped dramatically, while near-record delays in supply chains have hampered production and closure of companies it is causing an increasing proportion of the economy to be immobilized, “said Williamson, stressing that employment is being destroyed at a rate that has not been observed since the summer of 2009.
“Business sentiment for the next twelve months has collapsed to its record low, suggesting that the efforts of those responsible for monetary policy have failed to improve the outlook, which is becoming increasingly bleak,” he said.