Italy service sector shrinks at steepest rate on record in March

Gastronomy attendant working in compliance in compliance with the virus containment rules imposed by the Italian government during COVID-19 pandemic in Italy on March 24, 2020 in Fabbrico, Italy.

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Italy’s service sector shrank at the fastest rate in more than 22 years in March, a survey showed on Friday, as a lockdown imposed to try to contain the coronavirus pandemic shuttered most businesses. 

The IHS Markit Business Activity Index for services dived to 17.4 from 52.1 in February, way below the 50-mark that separates growth from contraction and the lowest reading since the survey began in January 1998.

The index level was also below the median forecast of 22.0 in a Reuters survey of 13 analysts.

The sub-index for new business in the services sector dropped even further to 13.8 from 52.2, also the lowest reading since the survey was launched.

IHS Markit’s sister survey for manufacturing, published on Wednesday, showed activity contracting at its fastest rate for 11 years, but less dramatically than for services.

Under the most recent restrictions, only services deemed vital for Italy’s supply chain can remain open.

The composite Purchasing Managers’ Index (PMI) for services and manufacturing plummeted in March to 20.2 from 50.7, also posting the lowest level since the survey began in January 1998.

The euro zone’s third-largest economy was already teetering near recession before the coronavirus hit, with gross domestic product declining by 0.3% in the fourth quarter of last year from the previous three months.

Economists now forecast a severe recession for Italy this year.

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