Business surveys, released earlier today, indicate this eurozone lockdown will be — in economic terms — nowhere near as painful as the spring’s. One reason is the remarkable pace at which industry has adapted to the pandemic.
The latest purchasing managers’ index for the eurozone, which recorded business activity in November, when many of the region’s economies — including the two largest, Germany and France — went into lockdown, fell below the crucial 50 level that marks the difference between an expansion and a contraction in activity. However the pace of the decline in the surveys, compiled by data firm IHS Markit, was far less steep than earlier this year:
As the chart above shows, the manufacturing index even remained in positive territory — meaning activity expanded. More on the detail contained in the subindices via J.P. Morgan’s Raphael Brun-Aguerre and Marco Protopapa:
The resilience of the manufacturing sector is broad based. New orders are still high by historical standards (-4.7 pts to 54.0), the employment index is up 1.3 pts to 48.5 and now stands above its pre-virus level, and the output price index is 0.8pt firmer at 51.3. The manufacturing-services divide is thus widening up.
Like most economic indicators right now, the PMIs are an imperfect reader of conditions . The readings for manufacturing tally with other anecdotal evidence, however. In Germany, where the manufacturing reading was an impressive 62.7 — enough to keep the main index for the country above 50 — carmakers such as VW expect to end the year in the black. Air freight figures show that, unlike passenger numbers, trade cargo has staged an impressive recovery.
That has been down to quick implementation of measures to keep workers safe including the setting up of testing sites at plants and the use of technology deployed in elite sports to measure athletes’ performance to ensure workers are socially distancing.
An increasing number of industrial firms are undertaking complex projects through remote working practices. Several energy firms have, for instance, drilled oil wells with far fewer people on site. Not quite what you might have in mind when it comes to remote working.
Of course, not all of industry has performed well. Super-spreading events, such as those at meat factories in Europe and in the US, spring to mind.
Still, the pace at which makers in Europe and elsewhere have adapted to the pandemic has been remarkable.
Related links Policymakers can learn from industry’s resilience — FT