Europe's manufacturing activity plummeted to its deepest documented recession in April as the economy continued to contract during its coronavirus lockout, a survey revealed Monday.
Data compiler IHS Markit said its final index of purchasing managers fell from 43.2 in March to 31.5 in April, in line with a preliminary reading. The freefall pushed the index down to its lowest level since records began in 1998, well below the 50-point line separating operation expansions from contractions.
An index measuring production, which feeds into Wednesday's composite PMI and is seen as a positive economic health measure, dropped to a low survey of 18.1 from 38.5.
Production collapsed as huge numbers of producers either temporarily shut down facilities or slash working hours in the midst of a decline of export demand across Europe and the U.S. and growing supply chain problems, Phil Smith, IHS Markit's leading economist, said.
As more companies are beginning to reopen albeit in a limited capacity, there remains some major question marks, such as what kind of demand environments they are moving to, and how long supply chains will be affected, Smith added.
Since mid-March France has been on curfew orders prohibiting non-essential practices. The possibility of a May 11 slow unravelling provides little consolation to businesses that expect a long journey back to work. Companies have been highly negative towards the market outlook, Eliot Kerr, an IHS Markit economist, stated.
Euro area manufacturing production slumped to a large extent beyond any downturn previously seen in the nearly 23-year history of the April PMI survey, indicating a variety of factors including extensive factory shutdown, faltering demand and supply disruptions, all related to the COVID-19 outbreak, Chris Williamson, IHS Markit's chief business economist, said.
Despite the European Central Bank's policy of easing and ramping up its quantitative easing program, the recession came amid massive quantities of government fiscal stimulus to support a pandemic-ravaged economy.
As output declined at the fastest rate in the data series tracing back to early 1996, companies were forced to lay off workers, also at the fastest pace since May 2009.
Smith stressed that German companies estimate disruption to supply and demand to drag on for the rest of the year, at least, clouding the opportunity for a speedy rebound.
The economy experienced the worst recession in first quarter on records dating back to 1949, contracting 5.8 percent from the previous three months, the INSEE statistics agency disclosed on Thursday.
