If, for whatever reason, you weren’t expecting the worst from Europe’s PMIs considering the total lockdown in place across the bloc’s largest economies, you got a wake up call on Tuesday, and a rather rude one at that.
The flash read on the composite PMI for March printed 31.4, IHS Markit said.
That is a mile below consensus (which was pretty bad at 38.8) and below even the most pessimistic estimate from nearly three-dozens economists (the range was 34 to 49).
The MoM drop was astonishing. In fact, the monthly fall in business activity (more than 20 points on the index) was the largest since comparable data were first collected in July 1998.
31.4 is the lowest reading since the series began, and well below levels seen during the financial crisis. The prior low was in February 2009, when the index hit 36.2, Markit reminds you.
“The PMI plummeted in March, of course it did”, ING wrote, in an e-mailed note. “Only a foolish optimist would have expected otherwise during the current supply and demand shock that the economy is facing”, the bank’s Bert Colijn wrote, adding that as bad as it was, “the survey likely still understates March activity as more restrictive measures came into effect after the survey was conducted” and besides, Colijn reminds you that the numbers don’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”.
As you can see in the visual, the services sector essentially flatlined. 28.4 is a new record nadir, and incoming new services business fell to 26.3. Here’s a visual that gives you some context for the scope of this calamity:
The good news is, the manufacturing sector held up far better, but you can probably expect a hit there too, if on a lag.
“Business activity across the eurozone collapsed in March to an extent far exceeding that seen even at the height of the global financial crisis”, IHS Markit’s Chief Business Economist Chris Williamson said.
If you’re wondering what this suggests for Europe’s economy, the answer is nothing good.
“The March PMI is indicative of GDP slumping at a quarterly rate of around 2%, 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”, Williamson remarked.