Virus Walloped US Economy in March — IHS Markit Index

Daniel Fowler
March 26, 2020

For most people, the new coronavirus causes only mild or moderate symptoms.

U.K. PMI sank to 37.1 from 53.0, the lowest since the survey started in 1998, while the services PMI fell to 35.7.

This will last for a minimum of three weeks, so the next set of PMI readings are likely to be even worse than this.

Evidence that the coronavirus pandemic is hammering the global economy mounted on Tuesday as business activity surveys from Australia and Japan to Western Europe showed record falls, with data for the United States expected to be just as dire.

Understandingly, the flash PMI signalled a fall in employment across the manufacturing and services to an extent not seen since July 2009. The 50 mark separates growth from contraction.

The composite index of services and industry recorded a preliminary level of 31.4 against 51.6 for March.

The German government expects the economy to shrink by around 5% this year as measures to contain the spread of the virus freeze up business activity across the country.

The eurozone's economic struggle was worsened by some European Union member states closing off their borders to neighbours, limiting the flow of goods and people within the single market. But that mitigation effort is yet to be felt.

The index, which is compiled by research firm IHS Markit, is below the trough registered during the global financial crisis in 2009.

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The figures for France and Britain also fell to historic lows.

Employees are being let go at the fastest rate since June 2009.

Both manufacturing and the UK's dominant services sector, including everything from banking to retailers, have suffered sudden and steep declines in work.

"And the escalation of measures to contain the virus outbreak mean we should be braced for the downturn to further intensify in the second quarter", he added.

"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.

Howard Archer, chief economic advisor to the EY ITEM Club, said: 'The reduction in services and manufacturing jobs reported by the purchasing managers highlights the importance of the Government's Coronavirus Job Retention Scheme and the need to ensure that it is effectively implemented. It also doesn'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. Federal Reserve policy maker James Bullard offered an even worse prediction that the jobless rate could rise to 30%. Perhaps most relevant is how much unemployment and bankruptcies can be avoided to determine the possible steepness of a recovery. The U.S flash manufacturing output index, on the other hand, posted at 47.6 this month versus last month's 50.7 and marked a 127-month low.

James Smith, ING economist, said the slump in the UK PMI "probably understates the loss to GDP we are likely to see in the short-term".

These were the details of the news Coronavirus sparks "collapse" in eurozone economy for this day.

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