PMI Data Shows Collapse in Eurozone Economic Activity in Response to Coronavirus Shutdown

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The Eurozone economy has slipped into a deep contraction according to PMI data for March, which shows efforts to curb the spread of the coronavirus has had a particularly detrimental impact on the bloc's services sector.

The Eurozone Flash Composite PMI from IHS Markit, which considers activity in the dominant manufacturing and services sectors, fell from 51.6 in February to 31.4 in March.

The Flash Manufacturing PMI came in at 44.8, down on February's 49.2 while the Services PMI read at 28.4, down from 53.6 previously.

The data all but confirms services sector activity in the Eurozone has all but collapsed as a result of the strict laws on movement introduced by the bloc's government's to try and counter the spread of the coronavirus. With cinemas, restaurants, hotels and other customer-facing businesses all closed, the decline will not come as a surprise.

It nevertheless signals to markets that the region could be entering a recession that exceeds the scale of the 2008-2009 crisis:

"Business activity across the eurozone collapsed in March to an extent far exceeding that seen even at the height of the global financial crisis. 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," says Chris Williamson, Chief Business Economist at IHS Markit .

While growth had accelerated modestly in the first two months of the year, March saw widespread disruptions to business from increasingly strict measures to contain the spread of the coronavirus.

Worryingly, IHS Markit report the unprecedented slumps in demand and business sentiment prompted the largest monthly cull in staffing levels since July 2009.

"March’s slump in the euro-zone Composite PMI is so sharp that at any other time it would look like a spreadsheet error. But now it is all too believable, and April’s data could be even worse," says Jack Allen-Reynolds, Senior Europe Economist at Capital Economics. "Given that survey responses were collected between 12th and 23rd March, before some of the lockdown measures had been implemented, if they remain in place then the data for April will be far worse."

France's Composite PMI fell from 52 in February to 37.2 in March, with the manufacturing PMI falling from 49.8 to 42.9. France's Service PMI endured a steeper fall from 52.5 to 29.

To put this into context, not even during the 2008 financial crisis did activity drop off to the extent as it did in March:

According to IHS Markit, French private sector activity contracted at the sharpest rate in nearly 22 years of data collection during March, amid widespread business closures due to the coronavirus outbreak.

“March saw a record rate of declines for services activity, while the manufacturing sector suffered to the greatest extent since the global financial crisis.Taken together, these declines suggest GDP is collapsing at an annualised rate approaching double digits," says Eliot Kerr, Economistat at IHS Markit.

Germany's Composite PMI fell from 50.7 in February to 37.2 in March, with the Manufacturing PMI falling from 48 to 45.7 and the Services PMI falling from 52.5 to 34.5.

This represents the lowest reading for Germany's services sector since data collection for the sector started in June 1997.

The data also showed a deepening downturn in the Germany's manufacturing sector which is the country's economic engine.

Production fell sharply and at the joint-fastest rate since early-2009, matching the rate of decline seen in July 2012, at the depths of the eurozone debt crisis.