The rapid decline in the Eurozone economy eased up slightly in May as countries lifted coronavirus restrictions, although the single currency area “remained stuck in its deepest downturn ever recorded,” survey data has shown.
IHS Markit’s composite purchasing managers’ index for the Eurozone, which gives an early indication of the health of the manufacturing and services sectors, rose to 30.5 in May from 13.6 in April.
The May reading beat economists’ expectations but was still well below 50, which indicates contraction. In context, the index remained considerably lower than the worst figure seen during the financial crisis.
It was the third month in a row that Eurozone output had fallen dramatically and showed that the “economy remained stuck in its deepest downturn ever recorded,” according to data firm IHS Markit.
Nonetheless, the three-month high of 30.5 indicates that some economic activity is picking up again as countries lift lockdowns. Expectations of output in the coming year rose for the second month in a row from March’s all-time low.
Yet there was not a huge amount to cheer in the survey data. Although economies across Europe began to reopen, IHS Markit said social distancing “continued to hit businesses such as hotels, restaurants, travel and tourism”.
Companies slashed jobs at a rate unimaginable before the coronavirus crisis. Services and manufacturing firms laid off workers as they adapted to lower demand.
Average prices continued to drop sharply as companies discounted to try to boost sales. It comes after official data showed that Eurozone inflation fell to a four-year low of 0.3 per cent in April.
Chris Williamson, chief business economist at IHS Markit said: “The Eurozone saw a further collapse of business activity in May but the survey data at least brought reassuring signs that the downturn likely bottomed out in April.”
“All Eurozone countries eased their Covid-19 containment measures to some extent in May, helping to moderate the overall rate of economic decline.”
Yet he warned that “some measures to contain the virus are likely to remain in place until an effective treatment or vaccine is found”.