“The outlook for the manufacturing sector seems uncertain due to the coronavirus pandemic.”

Prof Danie Meyer, a development economist and director of the TRADE research focus area at the North-West University (NWU), says besides external factors such as international demand, internal factors such as limited electricity supply and local demand are having a negative impact on the sector.

He says of major concern is the large number of temporary job losses in manufacturing, which could also lead to more permanent job losses in the long run.

“On a global scale, the manufacturing sector is seen as the driver of economic growth and development. According to World Bank data, the sector is responsible for close to 17% of the world’s economy, and before the onset of Covid-19 the global manufacturing growth rate was 4%.”

Prof Meyer says the Covid-19 pandemic has had a severe impact on the sector since the beginning of 2020. This has resulted in most countries recording negative growth rates in both the first and second quarters of 2020.

National lockdowns have resulted in the temporary closure of factories and production sites on all continents. After nearly two quarters of the pandemic, the question can be asked: what is happening with the manufacturing sector globally?

Well, says Prof Meyer, one way of measuring the health of the sector is via the purchasing managers’ index (PMI). This index is used in most countries and it measures the outlook of purchasing managers at factories and production sites. The index ranges from 0 to 100 and any score of more than 50 is an indication of a positive outlook.

“The PMI dropped to as low as 30 in some countries due to the devastating impact of the pandemic. The table below is a summary of global PMI trends. Firstly, we look at the USA and China – the two dominating global economies. The PMI of both countries has risen above the 50-point base line, indicating a positive outlook with possible growth and expansion.”

Prof Meyer says the Euro Zone also has a rising index of 51,8, and Poland, as part of the region, also reports a rising index of 52,8.

“In Asia the ASEAN countries have reported a low index of only 46,5, but with a rising trend. In Africa, selected countries indicate low indexes of below 50, but state that indexes are rising towards the base line.”

He says that, according to the ABSA PMI, South Africa had a surprisingly high index of 53,9 in June 2020 when factories were allowed to open at near full capacity, but unfortunately the index dropped to 51,2 in July. Expectations for the sector in Suid Afrika is in the balance and a positive recovery depends on a global economic recovery as well as local economic stability.

Purchasing managers’ index (PMI) data for July 2020

Source: IHS MARKIT, & ABSA PMI

Prof Danie Meyer.