Activity in the U.S. services and manufacturing sectors contracted sharply in March, as the coronavirus outbreak continues to weigh on economic growth and grind business operations to a halt, according to IHS Markit.
IHS Markit’s flash U.S. services purchasing managers index (PMI) declined to a record low of 39.1 for the month, falling from a reading of 49.4 in February. This was below the level of 42.0 expected for March, according to Bloomberg consensus data.
The firm’s PMI for the domestic manufacturing sector fell to 49.2 in March from 50.7 in February, reaching the lowest level since 2009. Consensus economists expected the preliminary monthly PMI to come in at 43.5.
Readings below the neutral level of 50 signal contraction in a sector.
IHS Markit’s report adds to a growing pile of disappointing data depicting a U.S. economy that rapidly went from flourishing to languishing as the coronavirus pandemic overtook the country.
Earlier this month, the New York Federal Reserve’s Empire State Manufacturing survey posted the largest drop on record between February and March, as its overall index of business conditions fell to its lowest level since 2009. The survey noted a leveling off of employment, drop in average workweek and deterioration in firms’ optimism about the near-term outlook amid the coronavirus as cause for the decline.
A subsequent report from the regional Philadelphia Federal Reserve showed a similar “significant weakening in regional manufacturing activity,” as general business activity, new orders and shipments dropped “precipitously,” according to the bank.
As these reports rolled in, economists rapidly cut their expectations for economic output in the U.S. Goldman Sachs economists said last week they expect a quarter-on-quarter annualized drop of 24% in U.S. gross domestic product (GDP) in the second quarter, and full-year output of -3.8% on an annual average basis.
Morgan Stanley economists on Sunday predicted an even steeper drop for the next quarter – they see U.S. GDP dropping at an annual rate of 30.1% in April through June.
Other countries’ data have also underscored economic deterioration as the coronavirus outbreak grips the world. The eurozone economy saw “an unprecedented collapse in business activity in March as the coronavirus intensified,” IHS Markit said, with the region’s flash PMI released earlier Tuesday more than 20 points to 31.4, its worst reading on record.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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