Eurozone manufacturing in 'dire straits' as activity collapses to record low
By Abigail Townsend
Date: Monday 04 May 2020
(Sharecast News) - Manufacturing activity across the Eurozone collapsed in April, research published Monday showed, as the Covid-19 pandemic closed factories and hit economies across the European Union.
The final IHS Markit Eurozone Manufacturing PMI was 33.4 in April, revised down from the flash reading of 33.6, and a sharp fall on March's 44.5. It was the lowest reading since the series began in June 1997
Output, new orders, export sales and purchasing actively all fell at record rates, with all categories recording notable deteriorations in operating conditions.
Within individual Eurozone countries, Austria, France, Italy and Greece reported series-low readings, of 31.6, 31.5, 31.1 and 29.5 respectively. Manufacturing-reliant Germany, the Eurozone's biggest economy, recorded its lowest level in 11 years of 34.5.
Spain, which has implemented one of Europe's most stringent lockdowns, was 30.8, the second weakest reading after Greece.
Chris Williamson, chief business economist at IHS Markit, said the heavy falls reflected "a combination of factors, including widespread factory closures, slumping demand and supply shortages, all linked to the Covid-19 outbreak".
"With virus curves flattening and talk now moving to lifting some of the pandemic restrictions, April will have hopefully represented the eye of the storm in terms of the virus impact on the economy, meaning the rate of decline will now likely start to moderate.
"However, the PMI is indicating an industrial sector that has collapsed at a quarterly rate of decline measured in double digits, and any recovery will be frustratingly slow."
Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said the data were "every bit as terrible as feared".
"New orders, export sales and expectations for the future production dropped to record lows, providing clear evidence that the Eurozone industrial sector is in dire straits. The decline was led by cratering PMIs in Italy and France, though the data elsewhere was grim too.
"Widespread lockdowns hit both demand and supply hard, forcing factories to shut down, and preventing supplies from reaching production facilities. The unprecedented hit to output forced firms to slash employment sharply, even factoring in job retention schemes."
Looking ahead, Vistesen said a sharp rebound was likely next month as activity started to resume.
However, he warned that did not signal that the sector was out of the woods.
"Social distancing measures will remain in effect, preventing firms from ramping up production, and end-demand will remain very weak", Vistesen said.
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