UK among economies risking record slump

LONDON (BBC): The coronavirus pandemic could trigger a global slump bigger than the Great Depression of the 1930s, a closely watched international survey suggests.

Manufacturing and services sectors in key geographical areas, including the UK, US and the eurozone, saw record falls in activity during March, according to Purchasing Managers’ Index data.

The UK figure, dropped from 53.0 in February to 36.0 in March.

Readings below 50 indicate contraction.

The data is published by IHS Markit and the Chartered Institute of Procurement and Supply (CIPS). Andrew Wishart, an economist at Capital Economics, said the PMIs were probably underestimating the scale of the economic fallout.

“We are forecasting a 15% fall” in economic output in the period from April to June, he said, “a larger fall in output than in the financial crisis or the Great Depression,” he said.

“It’s increasingly difficult to find the words to describe the devastation as every region in the world fights to save human life as the first priority,” said Duncan Brock, CIPS group director. “The likelihood of a global recession is now a given, though its duration and severity has yet to reveal itself.”

The composite figure for the manufacturing and services sectors in the eurozone was even worse, down from 51.6 in February to 29.7.

“Confidence about the future was the lowest recorded by the survey since data were first available in July 2012,” said IHS Markit.

“The four largest nations covered by the survey all registered record declines in activity, with Italy and Spain experiencing the sharpest reductions.”

Samuel Tombs at Pantheon Macroeconomics said the Italian and Spanish figures showed the slump might worsen in April, when the level of infections is expected to peak in those countries.