The dramatic plunge in economic activity across economies large and small became clearer on Thursday with the release of preliminary results of surveys of manufacturing and service sector activity (called PMIs) with the readings plunging to record lows across Asia and Europe.
The falls were especially large in Europe, Asia, especially Japan and Australia. France saw the lowest ever recorded on its monthly survey and German sentiment is set to plunge to a record low.
They were savage, worse than any market forecasts, and unprecedented in the steepness of the slide from an already low level in March.
IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI) sank to 13.5, by far it’s lowest reading since the survey began in mid-1998 and considerably below all forecasts for a reading of 18.0.
The IHS Markit flash eurozone services for April plunged to a record low of 11.7 from 26.4 in March, while the manufacturing PMI fell to a 134-month low of 33.6 from 44.5. The April readings were far below market forecasts.
The French services PMI fell to 10.4 in April from 27.4 in March, a record low, and the German services PMI likewise slumped to a record low of dropped to 15.9 from 31.7.
Economists say the readings for Europe are consistent with a 7% plus slump in June quarter GDP across the eurozone.
In Australia, the Commonwealth Bank/Markit Purchasing Managers Index (PMI) survey revealed that activity across the Australian economy collapsed this month slumping to a record low 22.4 points. A reading below 50 signals most firms saw weaker activity levels.
The distance away from 50 indicates the size of the majority. It has never been this low and supports the sharp falls in business conditions and confidence reported in last week’s March business survey from the National Australia Bank.
“The overall result is simply astonishing,” Commonwealth Bank senior economist Gareth Aird said in a release yesterday accompanying the PMI report.
“The collapse in the headline Flash PMI index for April reflects the severe contraction in economic activity currently taking place due to the coronavirus,” Mr. Aird said.
“Company shutdowns, government restrictions, and steep falls in customer demand, both domestically and from overseas, have all contributed to the overall reduction in business activity. With any reading below 50 signalling a deterioration in business activity on the previous month, the headline Flash PMI index for April was 22.4, down from 39.4 in March.
“While both the services and manufacturing sectors saw output fall sharply in April, the rate of reduction in the services sector was particularly strong.
“The services sector has been hit a lot harder than the manufacturing sector. And the pace of job shedding is concerning though not surprising given the large number of Australian businesses that remain shut,” he said.
The services sector PMI plunged to 19.6 points, a result partially driven by widespread reports of job losses which continued yesterday with Radio Rentals revealing that it is turning its closure of its retail, outlets on April 2 into a permanent shutdown (see separate story).
Other retailers are sure to follow suit.
In Japan the Jibun Bank Flash Japan Composite PMI, which includes both manufacturing and services, fell to a record low of 27.8 in April and down from the previous month’s final of 36.2.
The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI), released on Thursday, slumped to a seasonally adjusted 43.7 from a final 44.8 in March, its lowest since April 2009.
The au Jibun Bank Flash Japan Services PMI index plunged to 22.8 on a seasonally adjusted basis, marking the lowest since the start of the services sector survey in September 2007. The services sector activity was sharply down on the final reading of 33.8 in March.
The final readings for these PMI surveys will be out today week, May 1.
Meanwhile South Korea’s economy slumped into a contraction in the March quarter with GDP falling by a seasonally adjusted 1.4% in the first quarter from three months earlier, preliminary central bank data showed on Thursday, reversing the 1.3% growth in the fourth quarter.
Private consumption shrank 6.4% on-quarter to mark the worst reading since a 13.8% contraction in the first quarter of 1998, during the Asia Financial Crisis.
As a result annual growth slowed to 1.3% in the March quarter from 2.3% for 2019.
And the current quarter could be worse, even as the country starts a tentative move towards re-opening.
A report yesterday showed exports for the first 20 days of April plunged nearly 27% year-on-year. Exports are a bigger growth driver in South Korea (and Japan) than in Australia or the US).
In Europe, sentiment in France’s manufacturing sector dropped in April from March due to the coronavirus crisis, seeing its biggest decline since 1975, when the indicator was created.
A report from France’s national statistics agency Insee’s monthly survey on Thursday showed manufacturing sentiment fell to 82 in April compared with 98 in March, well below the long-term average of 100.
Insee says the figures can be “less precise” than they usually are because responses were collected between March 25 and April 17, when the population was confined.
French carmaker, Renault cancelled its dividend as sales slumped.
Renault said global sales dropped 25.9% year on year to 672,962 units in the first quarter and revenue for the quarter fell 19.2% to 10.13 billion euros ($US10.99 billion).
Renault is maintaining no guidance, having suspended it earlier in the year.
German car giant, Daimler said it sees sharply lower sales in 2020.
Revenue, industrial free cash flow and vehicle sales are also seen declining, with the company’s Mercedes-Benz cars, Mercedes-Benz vans, Daimler trucks and Daimler buses businesses expected to post lower unit sales.
The three months to March saw earnings plunging from the same period a year earlier.
According to preliminary figures, the Group’s first-quarter earnings before interest and tax (EBIT) fell to just 617 million euros ($US668 million) from 2.80 billion euros. Adjusted EBIT also fell sharply – 66% – to 719 million euros from 2.31 billion euros.
And German TV Network, Pro Sieben which also pulled its earnings guidance for the year and flicked its proposed 85 euro cents a share payout.
The group had forecast revenue for the year of 4.3 billion euros ($US4.65 billion) with adjusted earnings before interest, taxes, depreciation, and amortization of about 870 million, euros, excluding potential effects from the coronavirus.
