Eurozone economy shrinking by quarterly rate of 7.5% -survey

A closely watched survey of ecomic activity across 19-country eurozone suggests that single currency bloc is contracting at a quarterly rate of 7.5% as a result of lockdowns put in place by governments to get a grip on coronavirus pandemic.

Financial information firm IHS Markit said Thursday that its purchasing manrs’ index for eurozone — a broad gauge of ecomic activity — plummeted to an all-time low of 13.5 points in April from previous record low of 29.7 in March. firm has been compiling data for more than 20 years.

Anything below 50 indicates a contraction in activity, with a lower number indicating a sharper drop. So scale of April decline suggests that eurozone is heading for an unprecedented slump. At its lowest during global financial crisis in 2009, index only fell to 36.2.

“With large swas of ecomy likely to remain locked down to contain spread of COVID-19 in coming weeks, second quarter looks set to record fiercest downturn region has seen in recent history,” said Chris Williamson, chief business ecomist at IHS Markit.

Williamson said that at current rate, eurozone is shrinking by a quarterly rate of 7.5%.

European Union leaders will hold a virtual summit Thursday at which y are expected to endorse a financial aid pack worth 540 billion euros ($587 billion) that would help pay lost ws, keep companies afloat and fund health care systems.

EU’s institutions and nations have already mobilized around 3.3 trillion euros ($3.6 trillion) to help over-burdened health services, suffering small businesses, embattled airlines and newly jobless.

A more detailed look at survey released Thursday shows that services sector has borne brunt of lockdown measures, which have included widespread temporary business closures and and draconian restrictions on movement. From restaurants to travel and tourism, business has fallen off a cliff as companies have had to enforce shutdowns or severely curtail ir activities.

Manufacturing is barely faring better, with lockdown causing a collapse in global demand and huge disruptions in supply chain.

As a result, unemployment is expected to rise sharply over coming months.

“In face of such a prolonged slump in demand, job losses could intensify from current record pace and new fears will be raised as to ecomic cost of containing virus,” said Williamson.

Some ecomists expect eurozone unemployment rate to rise from 7.3% to well over 10%, though re are millions of people who remain on payrolls but are out of work and losing income.