EUR: negative data in the Eurozone ahead of today's economic forecasts

Ahead of today's European Commission economic forecasts, data has been released which shows bad signs for what lies ahead. According to PMI (Purchasing Managers' Index) data published in the IHS Markit Flash Composite report, most economic growth not only fell but also came to a halt this month. The figure quoted is around 14.

The data shows that this is the weakest economic indication in the union in 22 years. According to IHS Chief Economist Markkit. "This month is marked by unprecedented damage to the euro area, with measures to contain the virus combined with a collapse in global demand and shortages of staff and inputs".

Containment

Elsewhere, it is estimated that almost a third of the world's population has been forced to stay home, with doctors and scientists fighting an "invisible enemy". In Europe, the confinement is lasting 2 months for many. Europe was the epicentre of the virus for much of last month and early this month, before being overtaken by the United States.

Figures indicate that the largest countries in Europe: Germany, France, Spain and Italy, recorded between 750,000 and 850,000 cases of the new virus. With a mortality rate close to 9% of those infected.

However, over the weeks and as we move forward into next month, the number of new cases is gradually decreasing, leading many people to believe that the continent's lockdown is finally coming to an end.

Economic outlook

Today's economic forecasts will be awaited by many to see how badly the euro area is financially affected by the virus crisis. Growth forecasts are expected to be weaker than ever before, perhaps since 12 years. There is therefore growing concern that Europe is facing the worst economic slowdown since its creation.

On the possibility of a recession, a senior economist at one of Europe's largest banks says that "the deeper and longer the recession, the greater the risk that the economy's supply potential will be damaged, as the likelihood of workers becoming unemployed and companies going bankrupt is high".

This is irrespective of the ECB's €1 trillion asset purchase plan.

What next?

The next step will now be to look ahead to mid-May, when most countries, such as France and Italy, plan to reopen their economies. This reopening should be done gradually, sector by sector, while maintaining certain aspects of social distancing.

This could lead to renewed optimism for many, but even if the containment measures come to an end, many could face prolonged unemployment as their former employers can no longer afford to pay them wages. This, combined with the risk of further spread, could mean that it may be some time before Europeans return to the lifestyle to which they have become accustomed in the last decade.