Italy’s service sector emerges slowly from lockdown crises

Italy’s service sector contracted again in May but less sharply than a month before, a survey showed, as the country emerged from its lockdown to try to contain one of the world’s worst coronavirus outbreaks.

The IHS Markit Business Activity Index for services rose to 28.9 from 10.8 in April, remaining far below the 50 mark that separates growth from contraction.

The data was less weak than expected. The median forecast in a Reuters survey of 17 analysts had pointed to a reading of 26.5.

April’s PMI was the lowest since the survey began in January 1998, reflecting a government lockdown that shuttered all but essential services for the whole month.

A full range of services, from restaurants to hairdressers and gymnasiums, gradually reopened during May.

The sub-index for new business in the services sector rose to 30.7 in May from April’s record low of 9.1.

IHS Markit’s sister survey for manufacturing, published on Monday, showed activity contracting in May but less sharply than expected and considerably less steeply than the month before.

The composite Purchasing Managers’ Index (PMI) for services and manufacturing climbed in May to 33.9 from 10.9, remaining well below the key 50 threshold.

The eurozone’s third-largest economy shrank by 5.3% in the first quarter from the previous three months, statistics bureau ISTAT reported last week, the steepest fall in gross domestic product since ISTAT’s current series began in 1995.

The government of the anti-establishment 5-Star Movement and the centre-left Democratic Party forecasts a full-year 2020 GDP decline of 8%.

Meanwhile, Italy’s unemployment rate plummeted to 6.3 in April, the lowest for more than 12 years, a data showed, as people stopped looking for work due to the coronavirus emergency.

Some 274,000 jobs were lost in April, as firms were forced to shut due to a government-imposed lockdown to try to curb the epidemic.

Only people actively looking for a job count towards the unemployment rate.

Analysts completely misread likely labour market developments in April for a second month in a row, with a Reuters survey of 12 economists forecasting a rise in the jobless rate to 9.5%.

April, which saw the lowest unemployment rate since November 2007, is the second month of jobs data to reflect the impact of Italy’s outbreak of coronnavirus which came to light on Feb 21.

ISTAT revised down the unemployment rate for March to 8.0% from a previously reported 8.4%.

The government’s lockdown measures have brought the economy to its knees, with all companies shuttered throughout most of March and April barring those deemed essential for the national supply chain.

Rome has pledged more than 75 billion euros in financial support for firms and families, and Economy Minister Roberto Gualtieri has said repeatedly that “nobody must lose their job because of the coronavirus.”

In the three months to April some 226,000 jobs were lost compared with the November-to-January period, ISTAT said.

Until the virus outbreak the Italian labour market had held up relatively well, despite an economy which has been broadly stagnant for over a year and contracted by 0.2% in the last quarter of 2019 compared with the previous three months.

In the first quarter of this year gross domestic product plunged 5.3%, the steepest quarterly drop since the current series began in 1995.

The second quarter, which contains more days affected by the lockdown, is expected to post an even steeper decline, before a partial rebound over the second half of the year.

In April, the youth unemployment rate, measuring job-seekers between 15 and 24 years old, fell to 20.3% from 26.5% to post its lowest level since February 2008.

Italy’s overall employment rate, one of the lowest in the euro zone, fell in April to 57.9% from 58.6% in March to register the lowest level since June 2017, ISTAT said.

The inactivity rate, measuring those neither in work nor looking for work as a proportion of the working age population, rose in April to 38.1% from 36.1%, to its highest level since June 2011.

Morale amongst Italian businesses and consumers plunged to multi-year lows in May, data showed on Thursday, as sentiment was shattered by the coronavirus epidemic and government-imposed restrictions to try to curb it.

National statistics institute ISTAT’s manufacturing confidence index dropped to 71.2 in May from 87.2 in March. ISTAT did not conduct its survey in April because of technical difficulties connected to the government’s lockdown to contain the virus.

Reuters