Business activity has cratered across Europe as attempts to contain the coronavirus pandemic push governments to shut down vast swathes of their economies, from shops to factories to restaurants, surveys showed on Friday.
The pandemic has infected more than a million people worldwide, paralysing economies as consumers worried about their health and job security stay indoors and rein in spending.
Governments in the euro zone have unveiled unprecedented stimulus measures and the European Central Bank has increased its asset purchase target for this year to around 1.1 trillion euros to try and mitigate the fallout.
But with businesses shuttered across the region, Purchasing Managers’ Indexes compiled by IHS Markit slumped to record lows in March and suggested it could be months before things returned to any semblance of normalcy.
“It’s clear that the economy is contracting more quickly than ever before during peacetime,” said Jack Allen-Reynolds at Capital Economics.
“We think that GDP across the euro zone will fall even more quickly in Q2 than the surveys suggest. We estimate that while lockdowns are in place, output will be at least 25% below its normal level.”
Italy and Spain have so far taken the biggest hit on the continent from the pandemic but all four of the currency union’s top economies – and Britain, which recently left the European Union – saw activity collapse.
Already teetering on recession before the coronavirus outbreak, Italy saw its services PMI dive to 17.4 while the new business index sank to 13.8. Economists now forecast a severe recession in the euro zone’s third largest economy this year.
In Spain, which has been under lockdown since March 14, the services PMI – which had been above the breakeven ‘50’ mark for over six years – sank to 23.0.
“The Italian and Spanish services PMIs in March shows that the slump might worsen in April, when the government expects COVID-19 infections to peak,” said Samuel Tombs at Pantheon Macroeconomics.
Services activity in Germany, Europe’s largest economy, also collapsed and firms shed staff at the fastest rate in almost 23 years, giving a glimpse of the damage done to the job market as businesses close to limit the spread of coronavirus.
In France, where the economy is operating at two-thirds of its normal level according to estimates from the INSEE official statistics agency, its PMI for services fell to 27.4.
While in Britain, the surveys showed a record-breaking slump among services and manufacturing firms deepened in late March with much of the economy in a shutdown.
“In one line: horrendous, and probably not reflecting the full devastation,” Pantheon’s Tombs said.