Euro area’s private service sector has been hit hard due to the restrictions to contain the corona epidemic. The currency bloc’s flash purchasing manager’s index for the service sector dropped a further 14.7 points to 11.7 in April. This fall is a much steeper one than consensus expectations of 22.8.
Today’s value is much lower than the 39.2 seen during the financial market crisis. Meanwhile, the manufacturing PMI index dropped 10.8 points to 33.6. Stripping the longer delivery times, the decline amounted to 14.3 points. All euro nations have been impacted by the crisis in more or less the same way. In services PMI index fell to 15.9 in Germany and to just 10.4 in France.
The PMI indices’ crash affirms that the euro area economy has been hit hard by the quarantine measures. This applies especially to private services. However, the manufacturing sector is also suffering severely, noted Commerzbank in a research report. Several firms have temporarily stopped production to protect their workforce or due to lack of intermediate products.
However, the PMI indices do not say anything about the degree of the economic slump. In such extreme situations as the current one, it is not possible to infer conclusions from the sentiment indicators on the hard data.
“The first indication of the actual decline in real GDP will only be provided by the preliminary flash estimate for the first quarter published next week. We expect a minus of 4 percent compared to the previous quarter. However, we will only see the full extent of the crisis in the second quarter. We expect a further decline of up to 10 percent. If the pandemic can be contained by the middle of the year, production is likely to rise sharply again in the second half of the year. But even in this case, production for 2020 as a whole will be down by at least 4 percent”, added Commerzbank.
