Published: Tue, March 24, 2020
Markets | By Otis Pena

Coronavirus pushes eurozone to largest plunge in business activity ever

Coronavirus pushes eurozone to largest plunge in business activity ever

The new orders index was 38.2 compared with 49.4 last month, a near 11-year low.

Economic activity halts in Europe, with Eurozone PMI composite flash plunging to 31.4 from 51.6, a faster dive than during the financial crisis.

"Clearly there's scope for the downturn to intensify further as even more draconian policies to deal with the virus are potentially implemented in coming months", its chief economist Chris Williamson said.

The March surveys point to GDP falling at a quarterly rate of 1.5% to 2% tipping the United Kingdom economy into contraction for Q1, IHS Markit chief business economist Chris Williamson said.

- Detailed PMI data are only available under license from IHS Markit and customers need to apply for a license.

Now people are being ordered to stay home and only go out to buy food or medicines, after the United Kingdom government announced a dramatic lowckdown last night and ordered the immediate closure of all non-essential shops. It also doesn't tell us much about the depth of the decline, because the PMI is a diffusion index which measures the amount of companies facing a deterioration in activity, not the depth of it. Normally this is a sign of economic improvement, now it signals large supply chain disruptions. Only producers in the food and drink, and chemicals and plastics sectors reported growth of output in March. The survey likely still understates March activity as more restrictive measures came into effect after the survey was conducted.

The last Chinese services PMIs came in at 29.6 with manufacturing at 35.7, he noted, stating it was possible the United Kingdom could reach that point now it is in full lockdown.

COVID-19: 39 new cases, nine more deaths reported on Chinese mainland
Hubei saw seven new deaths, all of which were in Wuhan, bringing the total number of deaths in the province to 3,160. With the pandemic rampaging across the world, the situation remains complex and challenging.

Rhys Herbert, senior economist at Lloyds Bank Commercial Banking, said: 'Social distancing measures are heavily impacting demand for many products and services with parts of the United Kingdom economy effectively in shutdown.

Other elements in the survey rang very loud alarm bells for the United Kingdom economy.

There has been "an unprecedented collapse" in business across the euro zone this month as European Union countries impose severe restrictions on movement to slow the coronavirus, according to indicators released Tuesday.

Archer expects the United Kingdom economy to contract both in the first and second quarter, which would mean the country is in recession, which is when you have two consecutive quarters of negative economic growth.

The employment sub-index fell to its lowest level since July 2009 as companies laid off workers and that presents the risk of sharp downward spiral for economies and the prospect of a slow recovery if redundant workers do not return to work soon.

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