Today we received a wide range of fundamental reports from the eurozone for the past month, a time when many businesses remained closed throughout the continent because of the coronavirus pandemic.
Not surprisingly, the reports showed a massive drop in economic activity. The eurozone Markit composite PMI dropped more than half, from 29.7 to 13.5 in April. The services PMI is the main reason why the composite is so low, coming in at the abysmal 11.7 against a forecast of 23.5. These are the lowest readings in over 20 years. Data in the UK was similar, indicating that the same processes are developing in both the UK and continental Europe.
While many European countries are preparing to relax the coronavirus countermeasures from May onwards, the World Health Organization has warned that reopening the economy too quickly could trigger a second wave of the pandemic.
Germany, Italy, Spain, and France might have seen the peak of the pandemic, but the United Kingdom likely has not, due to a delayed response to the crisis and insufficient testing kits. This is also true for the United States, though there the situation is even more critical.
Despite Trump’s earlier statement that the economy will reopen for Easter (two weeks ago), the more realistic prognosis of Steve Mnuchin is that this will happen by August. Thus, the second quarter of 2020 will likely also show poor economic results.
Today EU leaders are meeting to discuss once again what can be done to contain the economic damage caused by the pandemic. Reportedly, the EU Commission will propose a plan that allocates 2 trillion euro to the crisis to be spent over the next couple of years and repaid after the eurozone has recovered.
