'A taste of things to come': Italian services activity plunges to 11-year low as national lockdown weighs
- Italy's services activity contracted sharply in March, signaling the national lockdown is hammering the nation's economy.
- IHS Markit's Purchasing Managers' Index (PMI) for the services sector shrank from 52.1 in February to just 17.4 in March, a record 34.7 point slide.
- The services downturn reflects emergency measures and shutdowns intended to restrict the coronavirus outbreak in Italy, IHS Markit said.
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Italy's service sector ground to a virtual halt in March, reflecting the strict national lockdown imposed by the government to contain the coronavirus outbreak.
IHS Markit's Purchasing Managers Index (PMI) reading for Italian services fell by nearly 35 points in March to 17.4 - an 11-year low - as activity slumped compared to February. A reading above 50 indicates an expansion in activity, while a reading below 50 suggests a contraction.
Italian businesses, part of the respondents to the survey, on Friday reported their fastest contraction on record with the quickest rate of job shedding in more than 22 years of data collection.
Chris Williamson, chief economist at IHS Markit, said Italy's services PMI fell to the lowest level of any comparable survey at his firm in March and signaled that this was a "taste of things to come for other countries as lockdowns intensify."
IHS Markit's related index for Italian manufacturing activity, released on Wednesday, fell from 48.7 in February to 40.3 in March - a modest decline compared to the services sector.
The services reading indicates an "extremely challenging time for the Italian economy" as it's the lowest number recorded since the global financial crisis, IHS Markit said.
Prior to the Covid-19 outbreak, Italy's economy was already wobbling in the fourth quarter of 2019 with its gross domestic product contracting by 0.3%.
Lewis Cooper, an economist at IHS Markit, expects the impact to be felt for a long time as "sentiment with regards to activity over the coming 12 months plummeted to the lowest level on record."
More positively, analysts at Bank of America say the spread of Covid-19 is slowing and lockdowns should be eased from the middle of the second quarter.
Relaxing containment measures could allow for improvement in services activity, but BofA analysts still assume that Euro area PMIs will remain below 50 until August, they said in a research note on Friday.
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