It seems almost gratuitous at this point, but because it offers a glimpse of what’s in store for the world’s largest economy, documenting the numbers across the pond is obligatory.
The final print on the services PMI for Italy in March was 17.4. That represents a 5-handle drop from the flash read which was already shockingly bad. In total, the MoM drop from February is an unthinkable ~35 points.
If you’d be inclined to say this is understandable considering what amounts to a nationwide ban on human-to-human interaction, I’d agree – and that’s precisely the point. There is no more services sector in Italy. It disappeared last month. Poof! It no longer exists.
Underscoring the extent to which this kind of total cessation of economic activity has the potential to forever alter a nation is IHS Markit’s Lewis Cooper. “March data point to an extremely challenging time for the Italian economy and, for that matter wider society, with the sheer scale of the impact on output, employment and investment likely to be felt for a long time to come”, he said.
Indeed. And the picture isn’t much prettier across the region. Services gauges for France, Spain and the euro-area as a whole all printed sub-30 in the final read for March and were each revised sharply lower from the flash readings.
The composite gauge for the euro-area came in at 29.7 for March, down from 31.4 in the flash print. That points to a deep recession.
“With various countries stepping up their measures to contain the spread of the coronavirus, it’s no surprise to see the final PMI for March indicated an even steeper deterioration of business activity than the prior record decline signaled by the provisional ‘flash’ estimate”, Markit said. “The data indicate that the eurozone economy is already contracting at an annualized rate approaching 10%, with worse inevitably to come in the near future”.
Yes, “inevitably”, and the same is true in the UK, where the services PMI dropped to 34.5. The composite gauge fell 17 points to 36, the lowest since the series began some 22 years ago.
Duncan Brock, Group Director at CIPS had a characteristically colorful (albeit wholly dour) assessment. “The services sector was sucked into a black hole and flung into the unknown by the forceful impact of the COVID-19 coronavirus, affecting every area of supply chains from transport to purchasing levels and job creation”, he said Friday, of the UK’s predicament.
“It’s increasingly difficult to find the words to describe the devastation as every region in the world fights to save human life as the first priority”, Brock went on to say, adding that “with the lowest business optimism for over 20 years, the immediate outlook for the services sector is beyond grim”.
And speaking of “beyond grim”, the UK had its deadliest day yet in the epidemic with 684 fatalities.
That brings the total to 3,605.
