Eurozone business activity collapses in March due to Covid-19

Flags of the European Union flutter in front of the headquarters of the European Central Bank in Frankfurt am Main western Germany

Flags of the European Union in front of the headquarters of the European Central Bank in Frankfurt More

Flash composite Purchasing Managers Index (PMI) readings plunged to record lows in France, Germany, the United Kingdom, and the eurozone, signaling stark declines in manufacturing and service activity.

The March data are indicative of GDP falling at a quarterly rate of around 2 percent, and the escalation of measures to contain the virus outbreak mean that the economy would be braced for the downturn to further intensify in the second quarter, Phil Smith, principal economist at IHS Markit said.

'As more serious measures are considered by the UK Government, the effect of coronavirus on businesses will get much worse, ' Williamson said.

The Federal Reserve on Monday rolled out an extraordinary new array of programs aimed at softening the drag on the economy from COVID-19, backstopping an unprecedented range of credit for households, small businesses and major employers.

IHS Markit's so-called "flash PMI" survey, a preliminary report before final figures are released next week, is based on data collected from services firms and manufacturers between 12 to 20 March, hence before the shutdown.

In the eurozone - which includes Italy and Spain - manufacturing output slumped from 48.7 to nearly an 11-year low of 39.5. As a result, the indicator reached a record low.

Eurozone bond markets, which have been trying to gauge the impact of the economic hit from the outbreak and a significant rise in expected issuance as governments step up to counter the slowdown with fiscal stimulus, showed little reaction to the data.

Entire regions have been placed on lockdown and in some places soldiers are patrolling the streets to keep consumers and workers indoors, halting services and production and breaking down global supply chains.

Those are record lows for the services and composite prints, while the manufacturing print is at a 86-month low as the virus epidemic causes a record contraction in economic activity.

PMI surveys from Japan showed the services sector shrinking at its fastest pace on record this month and factory activity contracting at its quickest in a decade. "But now it is all too believable, and April's data could be even worse", said Jack Allen-Reynolds, Senior Europe Economist at Capital Economics. It will also expand its asset purchases by "as much as needed". The latest USA effort on that front remains stalled in the Senate as Democrats said it contained too little money for hospitals and not enough limits on funds for big business.

Euro zone finance ministers will meanwhile discuss proposals by the European Commission to deploy the bloc's bailout fund, which has 410 billion euros of unused lending power.

Speculation is mounting that data due on Thursday will show US jobless claims rose an eye-watering 1 million last week, with forecasts ranging as high as 4 million.

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