Eurozone economy downturn slows but output continues to plunge

Eurozone economy rapid decline has 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.