Businesses in the eurozone see ‘unprecedented collapse’ due to coronavirus

The eurozone economy has suffered an ‘unprecedented collapse’ because of the coronavirus pandemic, according to a closely-watched indicator. 

The purchasing managers’ index (PMI) released by IHS Markit shows a slump in March ‘far exceeding that seen even at the height of the global financial crisis’.  

The survey shows the the services sector taking the biggest hit, especially tourism and restaurants, after millions of people across Europe were ordered to stay at home.  

Companies in the service sector are cutting jobs at the fastest pace since May 2009, the latest figures show. 

The PMI reading released today is the lowest since records began in 1998.

This month’s figure is 31.4, compared to 51.6 last month. Any reading below 50 points indicates economic contraction.    

Manufacturing has also suffered, with factory output registering its largest monthly contraction since April 2009 and supply chains suffering.  

According to the latest figures, manufacturers have reduced their payroll numbers to an extent not seen since July 2012. 

Germany and France both saw their largest drops in service sector activity on record, while both countries’ manufacturing industries were also hit. 

There were already fears for Germany’s economy even before the crisis hit after it narrowly avoided a recession last year.  

The rest of the euro area reported an even steeper decline than seen in both France and Germany, economists say.  

The tourism sector has been hard hit by the crisis, with popular destinations such as Rome (pictured) left deserted by travel bans and lockdowns 

Chris Williamson, chief business economist at IHS Markit, says the survey suggests an annual contraction of 8 per cent, although that forecast is likely to worsen.

‘Business activity across the eurozone collapsed in March to an extent far exceeding that seen even at the height of the global financial crisis,’ he said. 

‘Steep downturns were seen in France, Germany and across the rest of the euro area as governments took increasingly tough measures to contain the spread of the coronavirus. 

‘The March PMI is indicative of GDP slumping at a quarterly rate of around two per cent, and 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. 

‘Demand for many goods and services has fallen dramatically, while near-record supply chain delays have stymied production and business closures mean an increasingly large proportion of the economy is being mothballed. 

‘Employment is already falling at a rate not seen since July 2009 as despair about the outlook broadens. Business sentiment about the year ahead has plunged to the gloomiest on record, suggesting policymakers’ efforts to date have failed to brighten the darkening picture.’

European leaders have pledged an unprecedented array of economic measures to reduce the impact of the health crisis. 

Governments have unleashed billions in public spending, including in Italy which is now at the forefront of the global crisis. 

Italian prime minister Giuseppe Conte has hailed his €25billion (£23billion) programme as an ‘Italian model’ that other countries could emulate.

His plan includes a ban on layoffs, tax credits to keep businesses alive and direct payments for self-employed and seasonal workers such as tour guides.  

The European Central Bank has also announced a €750billion bond-buying scheme, days after it unveiled a stimulus package that failed to calm anxious markets.