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Coronavirus hammers German service sector in March - PMI

By Michael Nienaber
The skyline is pictured at the end of the first day under a partial lock down of the city by authorities due to the spread of the coronavirus disease (COVID-19) in Frankfurt

By Michael Nienaber

BERLIN (Reuters) - The coronavirus outbreak has plunged business activity in Germany's private sector to the lowest level since the global financial crisis in 2009, driven by a record contraction in the service sector, a survey showed on Tuesday.

Markit's flash composite Purchasing Managers' Index (PMI), which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, tumbled to 37.2 in March from 50.7 in February.

This undershot the consensus forecast of analysts who had expected a drop to 40.6 in a Reuters poll - although their forecasts ranged all the way from 47.0 down to 31.0, reflecting huge uncertainty over the impact of the pandemic.

"The unprecedented collapse in the PMI underscores how Germany is headed for recession, and a steep one at that," Phil Smith, Principal Economist at IHS Markit, said.

The March figures suggested that Europe's largest economy could shrink by around 2% quarter-on-quarter in the first three months of the year, Smith said.

"And the escalation of measures to contain the virus outbreak mean we should be braced for the downturn to further intensify in the second quarter," he added.

The German government expects the economy to shrink by around 5% this year as measures to contain the spread of the virus freeze up business activity across the country.

The cabinet on Monday agreed a package worth up to 750 billion euros (696.30 billion pounds) to mitigate the damage, with Berlin aiming to take on new debt for the first time since 2013.

The service sector has been hit especially hard by the government's security measures. The PMI subindex for the sector showed activity falling to the greatest extent in almost 23 years of data collection and at a rate that far surpassed anything seen even during the depths of the global financial crisis.

"The downturn in manufacturing has also deepened, and the situation is much worse than the headline PMI suggests," Smith said.

"The underlying data for manufacturing output and new orders are some of the worst we've seen over the past decade, though not as bad as the service sector."

(Reporting by Michael Nienaber; Editing by Hugh Lawson)