Coronavirus threat plagues Eurozone factory output
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Italy’s factory output slumped for the 17th month in a row in February, it emerged today, as economists warned the coronavirus outbreak could deepen the Eurozone’s manufacturing downturn.
The embattled economy’s manufacturing industry activity fell from 48.9 in January to 48.7, according to IHS Markit’s purchasing managers’ index (PMI). Anything below 50 represents a contraction.
And Italian factories’ selling prices sank at their fastest rate since January 2015, the data showed.
Overall manufacturing PMI for the Eurozone showed a rise from 47.9 in January to 49.2 in February. However, the coronavirus outbreak dealt the bloc’s economy some body blows as it disrupted global supply chains amid measures to contain the virus.
That led to longer waits for parts due to travel restrictions put in place to curb the spread of the coronavirus. Meanwhile, widespread store closures and the coronavirus’ impact on business confidence hurt foreign orders.
And IHS Markit warned the ongoing rising number of coronavirus cases could worsen the outlook of Eurozone manufacturers.
“The concern is that coronavirus-related delays in shipments threaten to constrain production in the coming months, prolonging a downturn that already extends to over a year,” IHS Markit’s chief business economist Chris Williamson said.
“Supply chains are lengthening to an extent not seen since 2018 and inventories are being depleted at a rate rarely seen over the past decade as companies struggle to produce enough to satisfy order books.
“While a return to work for many Chinese factories after the extended New Year holiday could help ease global supply constraints, any further spreading of the Covid-19 epidemic risks driving increased risk aversion and a reduction of spending by both businesses and consumers.”
Cases of coronavirus spiked again over the weekend. The death toll surpassed 3,000 as cases approached 90,000.
And a 50 per cent surge in cases in Italy led the government to vow to inject €3.6bn of stimulus into its already-struggling economy.
But economists said February’s overall manufacturing performance suggested the Eurozone’s long slump in manufacturing was easing.
“The coronavirus outbreak disrupted supply chains and hit foreign sales, resulting in considerably longer lead times and a steepening drop in export orders,” Williamson added.
“[But] February saw encouraging signs that the eurozone’s manufacturing downturn is easing. Production contracted at the slowest rate for nearly a year and, despite lost export sales, new orders fell at the weakest rate for 15 months amid signs of rising internal demand, notably from consumers.”
The Bank of England joined the Bank of Japan and the Federal Reserve today to say it was monitoring the coronavirus outbreak for risks to the economy.