Euro-Area Companies Are Set to See Virus-Related Woes Deepen

(Bloomberg) --

Euro-area companies are likely to see disruptions from the coronavirus outbreak increase in coming weeks, after they already reported widespread delivery delays, plunging export orders, and slowing job growth.

The worrying signs were contained in the latest composite Purchasing Managers' Index. The headline number rose slightly in February, but the survey also highlighted virus-related challenges.

The epidemic has spread across the European continent after emerging in China late last year, and risks delaying a long-awaited manufacturing revival. While service providers have long been a stronghold propping up the economy, they're now starting to see weaker demand from abroad.

“There are clear downside risks and a likely weakening of the economy in March,” said Chris Williamson, an economist at IHS Markit. “Growing numbers of companies are reporting lost business due to the virus spread, notably in sectors such as hotels, travel, transport and tourism but also even in areas such as financial services.”

The report showed that the overall economy was bolstered by robust domestic fundamentals. Yet, exports of both goods and services fell at an increased rate due to the virus, and far-reaching delivery delays threaten future production.

Business expectations have also dropped, according to the survey, and cautious hiring has lowered the pace of job growth to one of the slowest in five years.

“The euro-zone economy showed resilience to disruptions arising from the coronavirus outbreak in February, but dig deeper into the data and there are signs that problems lie ahead,” said Williamson.

The PMI for both services and manufacturing indicated expansion in February, rising to 51.6 from 51.3 the previous month. A reading for the service sector, however, came in slightly below an initial estimate.

--With assistance from Mark Evans.

To contact the reporter on this story: Carolynn Look in Frankfurt at clook4@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow

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