If the economy could send a Mayday call, this would be it: “The IHS Markit flash composite purchasing managers’ index for the eurozone plunged to 31.4 in March from 51.6 in the previous month.
Economic optimism has quickly evaporated in Europe as crucial metrics measuring sentiment plummeted this month. Business activity in the eurozone has sunk to a record low, with IHS Markit survey data pointing to an 8% annualised decline in eurozone GDP. Meanwhile, the European Commission recorded the most significant monthly drop in consumer sentiment since it started measuring this in 1985. UBS expects the eurozone economy to shrink by 4.5% this year, a similar decline to 2009 when Europe was at the height of the financial crisis.
The US index fell from 49.6 in February to 40.5 in March, while in the eurozone the index slipped from 51.6 to 31.4, and in the UK it dropped from 53 to 37.1. A reading below 50 indicates the majority of businesses reported a deterioration compared with the previous month.
The preliminary data were based on responses collected in mid-March, before the most severe elements of national lockdowns had been implemented, which means the data for April is likely to be even worse. They come after an activity survey for China, published earlier this month, showed that activity there fell to an all-time low in February, consistent with a deep recession.
The most severe downturns in activity in both the US and the eurozone were recorded in consumer-facing sectors, notably hotels, restaurants and other leisure-based activities. At the same time, there were record falls in the transport and travel sectors.
US services activity fell to 39.1, a record low, while the PMI index for the eurozone’s services sector dropped from 52.6 in February to 28.4 in March; also the lowest ever recorded. The PMI for UK services plunged to 35.7, another unprecedented low.
Bruno Le Maire, France’s finance minister, said on Tuesday that the economic impact of coronavirus was “comparable only to the great recession of 1929”. He declined to predict how much the French economy would shrink as a result of the crisis but said the industry was only operating at 25 per cent of its average level.
“The corona crisis is putting the functionality of the market economy to the test in many places,” Peter Altmaier, German economy minister, said in an interview with Handelsblatt newspaper on Tuesday. “Whole markets are completely breaking down.”