Service sector activity collapsed across Europe in March, as coronavirus blockages led purchasing managers’ indices to record their largest monthly decline to levels suggesting severe economic contractions.
None of the major European economies were immune to economic suffering, with the Italian index falling to levels far below the worst of the financial crisis 11 years ago. Spain, France and Germany have recorded the lowest reading in their respective surveys since they started more than 20 years ago.
For the euro area as a whole, the PMI composite services and manufacturing index, calculated by IHS Markit, fell from a reading of 51.6 in February to only 29.7 in March, the lowest reading since the investigation began 22 years ago.
Any level below 50 in the indices indicates that a majority of companies reported that their business activity had decreased in the past month. The figures have no direct impact on economic growth, although they do indicate a sharp contraction in production in Europe.
The Italian figures were the worst with a measure of overall service activity PMI of 17.4, a dip in the data which, according to IHS Markit, was “likely to be felt for a long time”.
It also marked the largest contraction recorded by IHS Markit in any other country during the Covid-19 crisis. Italian companies have registered the fastest contraction ever, and expect further decline in activity in the coming year. The job loss rate was the fastest since April 2009.
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Italy’s figures were the worst as it was the first European country to enter a tight lockdown, but other major European economies were almost as badly hit.
In France, the services PMI fell to 27.4 in March against 52.5 in February. Germany experienced an equivalent drop in its index from 52.5 to 31.7 and Spain suffered a drop from 52.1 to 23.0.
Outside the euro area, data from the United Kingdom paints a similar picture, its index going from 53.2 to 34.5.
Paul Smith, chief economic officer, IHS Markit, said: “The March investigation exposed the magnitude of the Covid-19 pandemic and the associated efforts to contain the epidemic, with service companies recording falls unprecedented activity, new work and confidence. ”