Eurozone economic downturn shows signs of easing as lockdowns lift

According to the report from IHS Markit, the eurozone economy remained stuck in its deepest downturn ever recorded in May due to ongoing measures taken to control the coronavirus disease 2019 (COVID-19) outbreak. However, the rate of decline eased as parts of the economy started to emerge from lockdowns.

The flash Eurozone Composite PMI rose from an all-time low of 13.6 in April to 30.5 in May, its highest since February. By remaining well below the 50.0 no-change level, the PMI registered a third successive monthly fall in output and continued to indicate a rate of contraction in excess of anything seen prior to the COVID-19 outbreak. The prior low of 36.2 was seen during the peak of the global financial crisis in February 2009.

The pandemic was again by far the most commonly cited cause of falling output, resulting in widespread closures of non-essential businesses, disrupting supply chains and hitting demand for a wide variety of goods and services. The rise in the PMI nevertheless indicated a markedly slower pace of contraction compared to April’s record collapse. Rates of decline eased in manufacturing and services, reflecting both a reduction in the number of companies reporting lower activity and an increase in the number of firms reporting an improvement.

The service sector business activity index picked up from 12.0 in April to 28.7, its highest since February, but social distancing and other virus related lockdown measures continued to hit businesses such as hotels, restaurants, travel and tourism and other consumer-facing firms especially hard, resulting in the third-steepest decline ever recorded.