(Bloomberg) -- The global health crisis dealt a swift, painful blow to the U.S. economy in March, with a gauge of activity at service providers and manufacturing contracting the most on record.
The IHS Markit composite index of purchasing managers tumbled 9.1 points to 40.5, marking the steepest drop in data back to October 2009, the group reported Tuesday. The plunge mirrors the rapid deceleration in other nations as the coronavirus tightens its grip on the global economy and financial markets.
“The survey underscores how the U.S. is likely already in a recession that will inevitably deepen further,” Chris Williamson, chief business economist at IHS Markit, said in a statement. “The March PMI is roughly indicative of GDP falling at an annualized rate approaching 5%, but the increasing number of virus-fighting lockdowns and closures mean the second quarter will likely see a far steeper rate of decline.”
The IHS Markit gauge of services slid 10.3 points to 39.1 in March. The median projection in a Bloomberg survey of economists called for a decline to 42.
With services comprising almost 90% of the U.S. economy, the slump in the index highlights the extent of the hit to the nation’s output as retailers, restaurants and other service providers shut down in an effort to contain the outbreak. Similar measures for Japan, Germany, the U.K., France and Australia were also at all-time lows.
The economic stoppage and social distancing is also starting to put U.S. manufacturing on its heels and threatens to become an even bigger drag in coming months.
While registering a smaller setback than the services gauge, the IHS Markit index of U.S. manufacturing dropped in March to 49.2, the weakest since August 2009. Readings below 50 indicate contraction. Factory orders shrank at the fastest pace since then as well.
As businesses close their doors and the economy grinds to a halt, millions of Americans are being dismissed and filing for unemployment insurance. The IHS Markit employment gauges for both services and manufacturing contracted in March.
“Jobs are already being slashed at a pace not witnessed since the global financial crisis in 2009 as firms either close or reduce capacity amid widespread cost-cutting,” Williamson said.
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