The headlines were abysmal but the details don't make reading any better
- France April flash services PMI 10.4 vs 24.5 expected
- Germany April flash manufacturing PMI 34.4 vs 39.0 expected
- Eurozone April flash services PMI 11.7 vs 22.8 expected
A couple of details stood out for me in the reports above, as noted by Markit and this will just add more food for thought as we try and quantify the economic damage in the region over the coming weeks/months.
From the Eurozone report:
Jobs were meanwhile cut to the greatest extent ever recorded by the survey, dropping for a second successive month. Service sector jobs were slashed at the steepest rate yet witnessed by the survey, while the drop in manufacturing payrolls was the sharpest since April 2009. In some cases, the employment decline reflected furloughed workers, but even if these workers are excluded the fall in employment was still among the steepest ever recorded by the survey.
That's rough news when you look at the grand scheme of things and in terms of labour market conditions moving forward.
From the German report:
April's survey showed sustained downward pressure on prices charged for goods and services, with the rate of decline accelerating to the quickest in more than a decade.
That is going to show up on inflation and price pressures in the coming months, which means central bank stimulus measures are going to be here to stay for a very long time - especially if most countries fail to dig themselves out of this hole.
And from the French report, this is what everyone should be thinking about:
Going forward, there are two key areas of focus. Firstly, how quickly will measures be lifted as the gradual easing of restrictions begins on the 11th of May? This will give the clearest indication on how fast we can expect activity to recover in the shortterm. Secondly, will the easing of restrictions lead to a second outbreak of the virus? If so, any remaining hopes of a so-called 'V-shaped' recovery will vanish.
In my view, any V-shaped recovery is already out of the picture. You just cannot go back pre-virus conditions anymore. There is going to be a new "normal" and that adjustment period - along with precautionary measures - is going to stifle the global economy still.
The worst-case scenario is that a secondary outbreak happens and that threatens to overload healthcare capacity once again. I think that is a scenario the market has turned a blind eye towards until now, so watch out for such a possibility.
