Recession. The collapse of demand and business confidence cause the largest monthly job cut since July 2009
The activity of the private sector in the eurozone registered its biggest drop in the entire historical series in March as a result of the impact of the coronavirus pandemic and the containment measures implemented by governments, as reflected in the preliminary composite index of managers of Purchases (PMI), which has fallen to 31.4 points from 51.6 in February, the lowest level of the figure since the records began in 1998, which anticipates a quarterly contraction of the eurozone GDP of 2% and suggests a further decline as the response to the epidemic intensifies, according to IHS Markit.
The drop in activity in March was especially significant in the services sector, whose leading PMI index stood at 28.4 points, compared to 52.6 in February, its worst reading since the start of the series in 1998. while the manufacturing sector has aggravated its recession, with a fall in the activity index to 44.8 points from the 49.2 of the previous month, at a minimum of 92 months, including the collapse of manufacturing production to the lowest of recent eleven years, with a PMI sub-index of 39.5 points, compared to 48.7 in February. “Business activity across the eurozone plummeted in March with an intensity that far exceeded the decline seen in the worst of the global financial crisis,” said Chris Williamson, chief economist at IHS Markit,
In this sense, the survey indicates that, while growth had modestly accelerated in the first two months of the year, generalized problems for activity were observed in March as a result of increasingly stringent measures to contain the contagion of the coronavirus outbreak. The service sector is the most affected in consumer-oriented segments such as travel, tourism, and restaurants, while in the manufacturing sector the decline has been less severe.
Record fall in March
In March, the volumes of new orders received fell with the highest intensity recorded to date, as a result of the record fall in new orders for exports as cross-border trade flows came to a standstill. Likewise, expectations regarding future total activity also deteriorated sharply, reaching their historic low, with record levels of pessimism observed over the next twelve months in both the manufacturing and services sectors.
Thus, the unprecedented slump in demand and business sentiment drove the largest monthly cut in employment since July 2009. In the case of the services sector, employment has been lost at the fastest rate since May 2009, while manufacturing has cut their workforces at an intensity not seen since July 2012. “Demand for many products and services has fallen dramatically, while near-record delays in supply chains have hampered production and business closures are causing an increasing proportion of the economy to be immobilized, “said Williamson, stressing that employment is being destroyed at a rate that had not been observed since the summer of 2009.
“Business sentiment for the next twelve months has collapsed to its all-time low, suggesting that the efforts of those responsible for monetary policy have failed to improve the outlook, which is turning increasingly bleak,” he added.