COVID-19 will worsen the global manufacturing downturn

Abstract

Subject Impact of COVID-19 on manufacturing. Significance The global manufacturing sector contracted by the most since 2009 in February. Production in China, the epicentre of the outbreak, fell at a record pace. UNCTAD estimates that February's production closures due to virus containment measures in China will cost the global economy more than 50 billion dollars in lost exports. Many closures continue and, taking demand into account as well, the manufacturing impact will be much more severe. Impacts COVID-19 is a demand and supply shock -- containment measures will reduce demand, disrupt global supply chains and force output closures. Raw materials costs will be low until a global recovery gets underway, but costs for parts and finished goods will rise as shortages grow. Firms will sell less but incur higher costs due to the virus outbreak and supply chain disruptions; multinational firms are most exposed. Multinational manufacturing firms are likely to reduce their earnings forecasts throughout 2020. Over years rather than months, multinational manufacturers and distributors will source more products from beyond China.