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Unprecedented period of contraction in PMI surveys
43 of 45 countries see record declines in output during
COVID-19 crisis
June sees some economies return to growth amid lockdown
easing
Over the course of 2020 the PMI data have tracked the economic
fallout from the coronavirus disease 2019 (COVID-19) pandemic
around the world, and going forward will show which economies are
able to recover quickly and which remain under pressure. This note
looks back on an unprecedented period for the PMI surveys.
Virus origins
The first cases of COVID-19 were identified around the start of
2020, and by the end of January the severity of the outbreak in
China was becoming clear. On January 30th, the World Health
Organisation (WHO) declared the outbreak a Public Health Emergency
of International Concern, with the authorities in China and
elsewhere in the region implementing lockdown measures to try to
limit the spread of the virus.
The impact of shutting down large swathes of the economy was
swift and dramatic. PMI data for Mainland China and Hong Kong SAR
plunged to record lows, with other PMIs in the region also pointing
to economic weakness. Outside of Asia, however, PMI data generally
remained in growth territory (see Map 1).
Global spread
Any illusions that the spread of COVID-19 was going to be
restricted to Asia were quickly dashed during March as the
epicentre of the virus moved to Europe. The WHO declared a global
pandemic on March 11th, with lockdown measures implemented in a
range of economies over the course of the month. A number of PMI
surveys saw record rates of decline in output during March, but
worse was to come in April, as illustrated in Map 2.
Of the 45 countries for which IHS Markit PMI data are available,
41 saw business activity fall at an unprecedented rate in April as
COVID-19 engulfed the global economy. Some of the rates of
contraction seen would have been unimaginable just weeks earlier,
with those countries with the strictest lockdowns registering the
steepest declines. In fact, India, Spain and Uganda all saw output
index readings in single figures, something never seen before in
the near-30-year history of IHS Markit's PMI surveys.
By April, however, Mainland China was out of lockdown, with
output nearing stabilisation as the economy reopened.
Economies reopen
May saw the epicentre of the pandemic move again, with the WHO
stating on May 22nd that South America was now the main area of
concern. This meant further severe declines in output in economies
such as Brazil, as well as other countries around the world where
lockdowns were yet to be loosened. PMI data for Qatar, South Africa
and Zambia even signalled new record contractions in output during
the month, with worries around the health infrastructure in
sub-Saharan African countries leading to particular caution in the
easing of restrictions there.
Much of the world was in easing mode by this stage, however, and
the PMI data signalled much softer reductions in output accordingly
for almost all countries during May. A notable exception was
Mainland China, where the PMI was now already back in positive
territory, posting solid growth.
Road to recovery begins
June PMI data has seen progress continue, with recoveries
underway in a number of countries (see Map 3). Ten countries saw
outright increases in output during June, with almost all the
others recording slower declines than in May. That said, some
economies remained in a deep downturn, including India, Indonesia
and Mexico.
The latest release of the J.P.Morgan Global Composite PMI showed
the global economy moving closer to stabilisation in June, with the
rate of decline in business activity easing sharply to the slowest
in five months. The data suggest that a gradual recovery from the
COVID-19 crisis has begun.
Mainland China backed up solid growth in May with an accelerated
expansion in June. Encouragingly, the rise in the output index in
China for the two months following its nadir has been at least
matched by other economies over the April to June period. This
provides hope that the path back to growth followed by China so far
can be matched elsewhere, with rates of expansion picking up in
July and August.
Recoveries are of course dependent on COVID-19 being brought
under control, however, and this is far from the case in a number
of countries which have nevertheless been easing restrictions.
Brazil, for example, has seen less of a rebound in its output index
as the virus remains widespread in the country. Meanwhile, other
areas are seeing restrictions re-imposed amid signs of the number
of cases picking up again, potentially bringing economic recoveries
to a halt.
Even where growth can be sustained during the second half of
2020, the economic scars left by the pandemic will take some time
to heal. Between February and May, all but two of the 45 countries
covered by IHS Markit PMI data saw record declines in output. The
only exceptions were Taiwan and South Korea whose manufacturing
sectors suffered greatly during the global financial crisis and saw
their nadirs occur then.
With fingers on the economic pulse of every region across the
world, the PMI surveys will track where recoveries take hold and
where setbacks are experienced. The next data release will be flash
data for July, published on July 22nd (Japan) and July 24th
(Australia, France, Germany, Eurozone, UK, US).
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
