NEW YORK, NY – MARCH 24: A Coca-Cola digital sign promoting social distancing due to the coronavirus … [+]
The social-distancing and quarantining efforts launched in the U.S. to slow the coronavirus contagion has produced the most severe contraction of economic activity since the subprime mortgage crisis last decade.
A closely-watched composite index which tracks overall business activity of private firms in the manufacturing and services sectors recorded its steepest decline since October 2009, when comparable data for the survey was first collected. The Purchasing Managers’ Index, or PMI, put together by research firm IHS Markit and released Tuesday, is significant as a reliable early preview of official economic indicators.
The flash U.S. composite output index retreated to a seasonally adjusted 40.5 in March, down from 49.6 in February and a new low. Data from the survey, captured from about 1,000 companies, was gathered between March 12 and March 23. Final figures for the month will be released in April.
“The survey underscores how the U.S. is likely already in a recession that will inevitably deepen further,” said Chris Williamson, chief business economist at IHS Markit, in a released statement. “The March PMI is roughly indicative of GDP falling at an annualized rate approaching 5%, but the increasing number of virus-fighting lockdowns and closures mean the second quarter will likely see a far steeper rate of decline.”
According to IHS Markit, worrisome signs are plentiful. The London-based firm said companies reported the first contraction of new business since the launch of the survey, indicating a cratering of client demand.
Survey respondents underscored worsening conditions across the services sector, especially in travel and tourism and other consumer-facing industries, while manufacturers reported sharp contraction in production and new orders. Companies reacted to the rapidly deteriorating conditions by making the deepest reductions in the number of employees since 2009.
“Jobs are already being slashed at a pace not witnessed since the global financial crisis in 2009 as firms either close or reduce capacity amid widespread cost-cutting,” Williamson said.
The index tracking overall business output for the Eurozone also hit a record low this month. March. The flash Eurozone PMI composite output index slipped to 31.4 in March from 51.6 in February.