Global Manufacturing Data Shows Pandemic Impact

• U.S. manufacturing purchasing orders show steep contraction in March
• Eurozone manufacturing index falls most in 8 years
• IMF calls for $2.5 trillion for emerging markets

U.S. manufacturing PMI fell to 48.5 in March, down from 50.7 in February, according to IHS Markit’s survey. A reading below 50 indicates a contraction in activity, and last month’s is the lowest reading since the financial crisis. Output, new orders, production and employment declined at the fastest pace since 2009 as the number of coronavirus cases in the U.S. grew and non-essential businesses were forced to close.

“Growing numbers of company closures and lockdowns as the nation fights the COVID-19 outbreak mean business levels have collapsed,” said Chris Williamson, Chief Business Economist at IHS Markit. “While some producers reported being busier as a result of stockpiling and anti-virus activities, notably in the food and healthcare sectors, these are very much the minority, and most sectors reported a rapid deterioration in demand and production.”

The Institute for Supply Management’s (ISM) survey also showed U.S. factory activity contracting with PMI dropping to 49.1 in March from 50.1 in February.

Today we also saw how factories in the Eurozone, U.K. and Japan coped with the COVID-19 shutdowns. The data isn’t pretty. Just like in the U.S., contractions were slightly worse than flash estimates indicated last week and supply chain delays (which usually imply demand, not the case here) boosted the readings and masked the severity of the slumps.

U.K. manufacturing PMI fell to a three-month low of 47.8, down from 51.7 in February, according to IHS Markit. Output, which decreased in all major sectors except food production and pharmaceuticals, suffered its steepest fall since mid-2012, and the transport sector was the worst hit. New orders contracted at a similar pace due to reduced demand and dragged employment down at the fastest rate since July 2009. Business sentiment fell to a series-record low. Compounding the slide in U.K. stock markets today is the nation’s biggest banks scrapping dividends and buybacks until the end of the year after being pressured by the Bank of England.

Eurozone manufacturing PMI crashed to 44.5 in March, the lowest reading in 92 months, from 49.2 in February. The output index and new orders saw the greatest deterioration in around 11 years and job cuts surged. As you can see in the chart below, several countries recorded multiyear low readings with the worst performers being Italy and Greece.

In the world’s third largest economy, Japan, manufacturing output fell at the sharpest rate since the 2011 tsunami. PMI fell to 44.8 in March, down from 47.8 in February.

Hopes for a V-shaped global recovery are rapidly receding, and lockdowns are expected to be extended in many parts of the world. IMF managing director Kristalina Georgieva said on March 27 the global economy has entered a recession and called for “very massive” spending. “We do project recovery in 2021–in fact there may be a sizeable rebound, but only if we succeed with containing the virus – everywhere – and prevent liquidity problems from becoming a solvency issue,” she said. “A key concern about a long- lasting impact of the sudden stop of the world economy is the risk of a wave of bankruptcies and layoffs that not only can undermine the recovery but can erode the fabric of our societies.” She added that emerging markets will need $2.5 trillion in outside financing.