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UNIDO projects ‘biggest collapse’ for global manufacturing

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A manufacturing plant.

… As output falls 11.2 per cent in Q2


The United Nations Industrial Development Organisation (UNIDO) has projected a gloomy outlook for the global manufacturing industry, saying it was set for its biggest collapse in decades, by year-end.

According to a new report released Monday by the Organisation, manufacturing production fell sharply in most countries around the world in the second quarter (Q2), 2020, with the exception of China, where output had already returned to moderate growth.

On current estimates, UNIDO projected a decline in global manufacturing value added of 8.4 per cent for the year as a whole, which makes 2020 the worst year on official records for the sector.

According to the report, the global manufacturing output fell by 11.2 per cent in the quarter under review, compared with the same quarter in 2019, noting that the dramatic drop reflects the economic impact of measures imposed to halt the spread of the COVID-19 pandemic.

The figures from UNIDO showed that measures like border closures, and global lockdowns, overshadowed all other negative influences on the sector, and projected more disruptions to manufacturing over the coming months due to the impacts of the pandemic.

Speaking on the report, Chief Statistician, UNIDO, Fernando Cantu, said based on the scenario, and developments in manufacturing linked to other economic variables, the anticipated fall in global manufacturing would mark the biggest collapse in output since official records began.

He said some countries were likely to be harder hit than others, with China expected to record a more modest drop of 1.6 per cent compared with the United States and Europe’s industrialized economies, where value added was forecast to plummet by 15 per cent and 14.3 per cent, respectively, by year-end.

However, Cantu noted that more time was needed to assess the full impact of containment measures on households, businesses and the government balance sheets, and raised concerns of a possible second wave of the pandemic, which could require the return of harsher economic restrictions, with knock-on effects on supply and demand.

According to Q2 figures, there was a wide divergence between China and the rest of the world, as well as between and within developing and industrialized economies.

China was one of the first countries to impose a lockdown and most of the impact was felt during the first three months of the year. In Q2, China’s manufacturing output had already returned to growth.

The country’s manufacturing output increased by 2.8 per cent year-on-year, led by industries such as computer electronics (11.2 per cent), electrical equipment (6.8 per cent) and machinery (6.3 per cent).

On the other hand, the data for developing and emerging industrial economies (excluding China) show a markedly gloomier picture, with Q2 output plunging by 22 per cent on the year following a 2.3 per cent drop in the first quarter.

The hardest hit geographical region was Latin America, where manufacturing output fell by 24.2 per cent year-on-year, followed by Asia and the Pacific, which saw a 23.7 per cent drop.

According to the report, the Q2 manufacturing output for industrialized economies sank by 16.4 per cent as economic recessions started to bite in many major economies. Europe’s manufacturing production dropped by 19.3 per cent, making it the worst-affected industrialized region.

The sharp decline intensified a trend seen in previous quarters, particularly affecting export-oriented economies, amid ongoing trade frictions with the United States and the uncertainty surrounding the United Kingdom’s departure from the European Union.

Given the characteristics of the ongoing COVID-19 crisis, there were substantial differences in manufacturing output per sector in recent months. For example, production of essential goods and supplies, such as food and pharmaceutical products, was less affected than other industries.

Production of basic pharmaceuticals in all country groups in the quarter under review showed moderate growth, while the production of capital and durable goods, such as machinery and motor vehicles, dropped sharply over the same period due to shrinking demand. UNIDO projects ‘biggest collapse in decades for global manufacturing industry.

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