US, WASHINGTON (ORDO NEWS) — Coronavirus and its quarantine in European countries have fallen off the Eurozone business activity index. There was no such fall even after the last world financial crisis.
Business activity in the eurozone in March fell to 31.4 points from 56.1 points in February, follows from the new release of the Purchasing Managers Index (PMI Index), which was presented by the consulting company IHS Markit.
This is the biggest drop in business activity for the month since July 1998, when the company began to calculate the index, the document says. The previous record was set in February 2009 – after the global financial crisis.
“Although growth accelerated slightly in the first two months of the year, in March there was an extensive shock for business from increasingly stringent measures to limit the spread of coronavirus. The service sector has suffered the most, especially consumer-dependent areas such as tourism, travel and restaurants. <…> Production faced a less severe but equally steep decline,” the IHS Markit report said.
In March, there was a supply chain disruption, the worst since May 2000. Previously, supply constraints led to higher prices because demand exceeded supply, but in March, industrial prices fell to a minimum of four years because companies offered discounts to increase sales and reduce inventory, the company said.
“Business activity in Europe fell in March much more significantly than it was even at the peak of the global financial crisis. <…> The business activity index in March indicates a quarterly drop in GDP of about 2%, and, obviously, the drop may increase even more if draconian measures to combat the virus are taken in the coming months. <…> Employment is already falling at a pace unprecedented since July 2009, as despair is growing due to prospects,” wrote Chris Williamson, chief business economist at IHS Markit.
The fall in business activity suggests that the eurozone is heading for a deep recession, writes the Financial Times. According to IHS Markit, the survey data “suggest an 8% annual decline in Eurozone GDP,” even though “it does not look like the [business activity] index has already hit the bottom.” The PMI is the first assessment of the impact of coronavirus on the economy, which the market is closely monitoring, the publication said.
“The flow of measures on the part of regulators cannot prevent the devastating effect in economies from the virus and measures to limit its spread. It can only prevent a continued loss of production, ”the newspaper quoted Kenneth Wattrett, chief economist for Europe at IHS Markit.
The PMI is an average of activity in manufacturing and services. A value below 50 points means that the majority of enterprises surveyed reported a deteriorating situation compared to the previous month.
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