The Economy

Global Manufacturing Dives Amid Virus Lockdowns

Even export powerhouses Germany and Japan saw steep decreases in factory output last month as the coronavirus upended supply chains and crushed dem...
Matthew HellerApril 1, 2020
Global Manufacturing Dives Amid Virus Lockdowns

The coronavirus pandemic dealt a severe blow to manufacturing activity around the world in March, with even export powerhouses such as Germany and Japan experiencing sharp slowdowns.

Germany’s manufacturing sector saw the steepest decrease in output in almost 11 years as IHS Markit’s Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of the German economy, fell to 45.4. A reading below 50 indicates a contraction in activity.

In Japan, factory activity contracted at the fastest pace in about a decade in March, “adding to views that the world’s third-largest economy is likely already in recession,” Reuters reported.

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The U.S., meanwhile, saw new orders fall to the lowest level since the end of the Great Recession. The Institute for Supply Management said its manufacturing index slipped to 49.1% last month from 50.1%.

Economists surveyed by MarketWatch had forecast a drop to 44%, but the survey was completed before widespread sections of the U.S. economy were shuttered.

“The index is all but certain to sink next month, though a few industries are likely to hold up surprisingly well because of an increase in demand for products such as toilet paper, sanitizer and other consumer goods in short supply,” MarketWatch said.

As Reuters reports, the coronavirus has “forced factories, shops and schools to close amid government-imposed lockdowns,” upending supply chains and crushing demand for goods as consumers worried about job prospects rein in their spending and stay indoors.

While policymakers have announced massive monetary and fiscal stimulus measures, many “have been short-gap steps to deal with the immediate damage to corporate funding and shore up banking systems amid worries of a credit crisis,” Reuters noted.

China, though, showed some improvement in manufacturing last month. The Caixin/Markit manufacturing PMI was 50.1 compared to analysts’ expectations of 45.5 and following February’s sharpest contraction on record at 40.3.

“At face value the survey suggests that just over half of firms saw conditions improve last month—implying that activity improved marginally relative to February’s dismal showing but still remains very weak,” Martin Rasmussen, China economist at Capital Economics, wrote in a client note.

Photo by Sean Gallup/Getty Images