European factory output plummets due to COVID-19 shutdown, report says

Manufacturing activity in the eurozone has suffered its largest decline since the 2008 financial crisis and factories in Italy endured the fastest contraction in output on record as the COVID-19 pandemic hit the continent’s economy, according to the latest survey from IHS Markit.

The IHS Markit manufacturing purchasing managers’ index for the eurozone fell to 44.5 in March from 49.2 in the previous month, marginally below the initial estimate of 44.8. The contraction in manufacturing output was the greatest since April 2009 and was coupled with a similar fall in new orders and exports. A reading below 50 indicates a majority of businesses reported deteriorating activity compared with the previous month.

“The disruption has been two-fold, causing havoc on both the demand and the supply-side,” said Eliot Kerr, an economist at IHS Markit. The supply of goods is diminished, with difficulties sourcing parts and staff unable to work amid factory closures, while the restricted movement of people and social distancing “has acted to stifle demand, delivering a double-barrelled blow to the economy,” Kerr said.

The manufacturing survey for Italy – which has been on lockdown since March 10, with non-essential factories shuttered since March 22 – tumbled to 40.3 in March, from 48.7 the month before, the largest monthly drop since records began in 1997. Sharp falls in activity were also reported elsewhere in Europe. Industrial companies in Spain, France and the UK reported their largest drops in output since mid-2012. Germany’s export-focused manufacturers – which account for a fifth of Europe’s largest economy – reported the fastest fall in output for over a decade, down from 48 last month to 45.4 in March.

Purchasing managers’ indices from Japan, South Korea, Thailand, the Philippines, Indonesia, Malaysia and Vietnam all pointed towards recession, while more positive data from China and Taiwan suggested stabilization at a low level of activity, IHS said.