Europe’s Factories Remain at Risk Amid Slow Virus Recovery

(Bloomberg) --

European manufacturing will take a long time to overcome the damage caused by the coronavirus, after suffering an unprecedented slump in April.

In its monthly report on factories, IHS Markit said the recovery from shutdowns will be “frustratingly slow.” With economies still not running at full speed for some time, that means businesses and jobs will remain under threat.

Markit's index showed confidence dropped to a record low in April, and job cuts were the sharpest since 2009. The headline measure of euro-area activity fell to 33.4 -- the lowest since the series began in 1997 -- from 44.5 in March. A measure of output plunged to just 18.1, far below the key 50 level.

There were also record-low readings for France and Italy, while those in Spain and Germany were at the weakest in about 11 years.

The grim figures may drive calls on governments to move more quickly to lift restrictions that have caused huge damage to businesses and livelihoods. The challenge for politicians is to try to get economies back to normal without risking a second wave of infections that would necessitate another round of destructive shutdowns.

With some countries including Germany, Spain and Italy, slowly reopening, Markit Chief Business Economist Chris Williamson said April will have “hopefully represented the eye of the storm.”

But it's going to be some time before many businesses are fully operational, while the overall level of economic activity and demand will remain below normal for some time.

“Steps needed to keep workers safe will mean even businesses that are able to restart production will generally be running at low capacity, and most will be operating in an environment of greatly reduced demand,” he said. “Business spending on inputs and machinery and equipment will also remain subdued for some time.”