COVID-19: local manufacturing sees sharp decline
With COVID-19, continuing to significantly impact the manufacturing sector, we look at the recent report conducted by IHS Markit on local manufacturers.
Following measures taken to contain the outbreak of COVID-19, market analyst IHS Markit’s recent report has indicated a sharp decline in revenue and production volumes for local manufacturing.
Key findings: The IHS Markit report details a Purchasing Managers’ Index (PMI) of 31.3 for the direction of economic trends in April. Compared to its index in March (48.4) the sector has seen a 17.1 decrease - the sharpest performance decline since the collection of data began in 2012.
Within the report IHS Markit explains that the local and global restrictions enforced in order to contain the pandemic, is the key factor contributing to the industry's latest performance, due to restricted demand forcing producers to operate below full capacity, or even completely suspend output.
This trend comes partly due to the insufficient manpower and lack of new projects and purchase order. As a result this is having an unprecedented impact on the supply chain.
“It’s no surprise to see that measures taken to contain the Covid-19 outbreak led to a sharp fall in manufacturing activity in April. Domestic demand was hit hard by containment measures and production at many firms was curbed by business closures,” said Chris Williamson, IHS Markit’s Chief Business Economist, who added that “export demand meanwhile collapsed as governments around the world took drastic action to prevent healthcare systems from being overwhelmed.”
Other observations made by IHS Markit included a decrease in orders from foreign customers reported by 83% of companies, stemming from the transport and delivery limitations. In addition the report also details how price trends have dropped as a result of strained production lines causing the price of raw materials to fall.
When it comes to maintaining their workforce, IHS Markit reports 95% of companies have managed to retain staff, reporting unchanged numbers in employees.
“It was reassuring to see only a modest fall in employment, as the vast majority of firms held on to staff to safeguard longer-term production capacity. Business expectations for the year ahead also ticked higher, as more companies saw prospects improve. In that respect, with increasing numbers of governments looking at ways to ease Covid-19 restrictions, it’s likely that we will soon see the rate of export decline moderate, helping drive a recovery in production.” commented Williamson.
“A recovery is nevertheless likely to be sluggish, as global demand looks set to remain relatively subdued for some time,” concludes Williamson.
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