Susan Soho (Julius Baer) |The preliminary March leading indicators for the service sector signal a steep fall in service sector activity as a result of intensifying lockdown measures. We expect that Japan and the eurozone will see negative first quarter economic growth rates, with the UK and the US just escaping a negative first quarter. The second quarter will be even more intense, with all the economies heading for markedly negative economic growth.
All of March’s preliminary purchasing managers’ indices (PMIs) for Japan, the eurozone, Germany, France, the UK and the US (the one composed by Markit) fell massively as lockdown measures were introduced and stepped up. Through the band, services sectors were affected more heavily than the manufacturing sectors, as these felt the lockdown measures quicker and more completely. Next to small service providers that had to shut down as part of the lockdown measures, the financial sector, which suffered seriously due to recent market developments, could have weighed heavily on the service sector PMIs too. In contrast, manufacturing PMIs fell less than expected. They could have been inflated, once again, by longer supplier delivery times due to supply chain disruptions and thus send an overly optimistic signal. Moreover, they are likely to fall further in the coming month, as lockdown measures intensify.