US and European Buyer Management Index Plummets
Shocking GDP Decline Foretold
Economic Impact Spreads Amid Trump’s Hope to End Social Distancing
[Asia Economy New York=Correspondent Baek Jong-min] The economies of the United States and Europe, where the novel coronavirus infection (COVID-19) is spreading rapidly, are plunging at an unprecedented rate. Concerns are growing that the second quarter could record the worst performance in history. U.S. President Donald Trump has repeatedly emphasized the need to hasten the reopening of economic activities in the United States.
On the 24th (local time), data provider IHS Markit announced that the March Purchasing Managers' Index (PMI) for the U.S. and the Eurozone (19 countries using the euro) confirmed that a 'sharp plunge' worse than expected is becoming a reality.
The U.S. manufacturing PMI for March stood at 49.2, the lowest in the past 127 months. The previous month was 50.7. The services PMI also fell from 49.4 in the previous month to 39.1. The composite PMI dropped from 49.6 in February to 40.5 this month, marking the lowest level in 10 years.
The situation in Europe, announced earlier, is similar. The Eurozone's March services PMI was only 28.4, compared to 52.6 the previous month. The manufacturing PMI was 44.8, significantly below the previous month's 49.2. The composite PMI recorded 31.4, a sharp decline from 51.6 in February. The Wall Street Journal (WSJ) reported that this is the lowest level since IHS Markit began PMI surveys in 1998. This means the current economy is at a level even worse than during the 2008 global financial crisis. The PMI is an indicator showing economic trends; a value above 50 indicates expansion, while below 50 indicates contraction.
The problem is that this may not be the lowest point. As social distancing spreads and stay-at-home orders are issued across the U.S. and European countries, industrial activity has been severely restricted, making further economic decline unavoidable.
Chris Williamson, Chief Economist at IHS Markit, said, "The March PMI figures show that the second quarter (GDP) numbers will shrink to an overwhelmingly frightening level," adding, "We will be able to feel the global recession."
Reflecting these concerns, President Trump reiterated his desire to normalize the halted U.S. economic activities as soon as possible. In a broadcast interview that day, President Trump said, "I want to open this country up again by Easter." He added, "The cure is worse than the problem itself. If this continues, more people will die. We have to go back to work."
The New York Times reported that President Trump's plan conflicts with experts' opinions that social distancing must be maintained to prevent the spread of infection.
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