The Eurozone manufacturing purchasing managers’ index (PMI) is estimated to have plummeted at its fastest pace and to its lowest level on record to 33.6 in April, from 44.5 the prior month, according to a preliminary survey published by IHS Markit on Thursday.
European manufacturing activity is estimated to have contracted to a similar degree as the UK this month, as factory closures, social distancing measures, and restrictions on movement put a stranglehold on the industry.
According to the survey, Eurozone’s largest (Germany) and second-largest (France) economies’ PMI fell to record lows of 34.4 and 31.5, respectively, in April, from 45.4 and 43.2 in March.
France’s COVID-19 related lockdown is initially scheduled to end on May 11, while Germany’s carmakers, Volkswagen and Daimler, have slowly resumed production from April 20 after a “fragile intermediate success” against the virus.
However, decimated car sales, increased unemployment and job uncertainty is likely to disrupt consumer spending in the coming months, which will complicate the economic recovery in Germany as well as Europe once the outbreak is under control.
Unless substantial sales incentives are introduced, similar to the “cash-for-clunkers” scheme after the global financial crisis, the demand recovery will be a long and slow process as consumers will likely repair vehicles and white goods rather than purchase new high-value ticket items.