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Photo Credit: Deutchland.com

The euro-area economy is in a slump of unprecedented scale, and the contraction may deepen even further as lockdowns to contain the coronavirus are extended.

IHS Markit said its monthly measure of services and manufacturing points to an annualized economic contraction of about 10%. With new business, confidence and employment all down, there is “worse inevitably to come in the near future,” it said.

The estimate caps a gloomy week for Europe’s economy, where figures showed manufacturing in a deep recession, huge jumps in jobless claims, and thousands of companies in Germany cutting hours for workers.

Markit’s composite Purchasing Managers Index fell to 29.7 in March, it said Friday, even lower than initially estimated. That’s down from 51.6 in February and far below the 50 line that divides growth from contraction. Almost every country in the survey had a record-low reading.

The measure for services, which includes hotels and restaurants, was at 26.4, with Italy dropping to just 17.4.

The declines capture the impact on tourism and leisure businesses, which are now closed as part of national shutdowns. Many countries are extending their states of emergency as the death toll from the outbreak continues to rise.

“No countries are escaping the severe downturn,” said Chris Williamson, chief business economist at IHS Markit. “But the especially steep decline in Italy’s service sector PMI to just 17.4 likely gives a taste of things to come for other countries as closures and lockdowns become more prevalent and more strictly enforced in coming months.”

Source: Bloomberg, April 3, 2020