imageCoronavirus12 hours ago (Mar 24, 2020 07:41AM ET)

(C) Reuters. People walk on the esplanade of La Defense in the financial and business district of La Defense, west of Paris

By Leigh Thomas

PARIS (Reuters) – French business activity plunged to its lowest level on record in March as a nationwide coronavirus lockdown shuttered vast swathes of the euro zone’s second-biggest economy, a survey showed on Tuesday.

Data compiler IHS Markit said its preliminary purchasing managers index (PMI) fell to 30.2 from 52.0 in February, far below economists’ average forecast of 39.8 and even the lowest individual estimate of 36.0 in a Reuters poll.

The freefall took the index deeper below the 50-point line dividing expansions from contractions than it has ever been in its 22-year history.

The survey offers a first glance of just how badly business leaders expect the outbreak to hit their activity since the government ordered the lockdown earlier this month.

As a result, companies ranging from carmaker Renault (PA:RENA) to airline Air France KLM have had to abruptly suspend ordinary operations, halting production lines and leaving airplanes on the tarmac.

The survey showed that France’s dominant service sector bore the brunt of the storm battering the economy, while manufacturing retreated less dramatically.

The service sector PMI nosedived to a record low of 29.0 from 52.5 in February, far below not only the average forecast of 42.0 in Reuters poll of economists’ expectations, but also well below the lowest estimate of 32.0.

Meanwhile, in the manufacturing sector, the index fell to 42.9 from 49.8, which was not as bad as the 40.0 expected on average in Reuters’ poll.

“March saw a record rate of declines for services activity, while the manufacturing sector suffered to the greatest extent since the global financial crisis,” IHS Markit economist Eliot Kerr said.

“Taken together, these declines suggest GDP is collapsing at an annualized rate approaching double digits,” he added.

As many companies’ activity grinds to a halt, the government has tentatively estimated that the economy will contract by 1% this year with the caveat that was less of a forecast than a best guess given the unprecedented nature of the crisis.

The government launched a package of crisis measures last week worth 45 billion euros ($48.5 billion) – 2% of economic output – consisting mainly of deferred tax and payroll payments and cash for companies to put staff on leave rather than shedding them for good.

It has also pledged to guarantee 300 billion euros in business loans from commercial banks to keep credit flowing to the broader economy.

French business activity plunges to record low in March over coronavirus: PMIs

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