A closely watched survey of economic activity across the 19-country Eurozone suggests that the single currency bloc is contracting at a quarterly rate of 7.5 percent as a result of the lockdowns put in place by governments to get a grip on the coronavirus pandemic.
Financial information firm IHS Markit said Thursday that its purchasing managers' index for the eurozone — a broad gauge of economic activity — plummeted to an all-time low of 13.5 points in April from the previous record low of 29.7 in March. The 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 the scale of the April decline suggests that the eurozone is heading for an unprecedented slump. At its lowest during the global financial crisis in 2009, the index only fell to 36.2.
“With large swathes of the economy likely to remain locked down to contain the spread of COVID-19 in coming weeks, the second quarter looks set to record the fiercest downturn the region has seen in recent history," said Chris Williamson, chief business economist at IHS Markit.
Williamson said that at the current rate, the eurozone is shrinking by a quarterly rate of 7.5 percent.
European Union leaders will hold a virtual summit Thursday at which they are expected to endorse a financial aid package worth 540 billion euros ($587 billion) that would help pay lost wages, keep companies afloat and fund health care systems.
The 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 the newly jobless.
A more detailed look at the survey released Thursday shows that the services sector has borne the brunt of the 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 their activities.
Manufacturing is barely faring better, with the lockdown causing a collapse in global demand and huge disruptions in the supply chain.
As a result, unemployment is expected to rise sharply over the coming months.
“In the face of such a prolonged slump in demand, job losses could intensify from the current record pace and new fears will be raised as to the economic cost of containing the virus,” said Williamson.
Some economists expect the eurozone unemployment rate to rise from 7.3 percent to well over 10 percent, though there are millions of people who remain on payrolls but are out of work and losing income.
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