coronavirus pandemic sees global industry heading into a deep … · coronavirus pandemic sees...

Coronavirus pandemic sees global industry

heading into a deep but short recession

Chloe Parkins

Economist

[email protected]

16th June 2020

Outline of presentation

Questions: Use the question panel on the right 1

• The global impact of the coronavirus so far

• The trough

• The recovery

• Other possible scenarios

The global impact of the coronavirus so far

China led the drop in output in Q1 2020


-14 -12 -10 -8 -6 -4 -2 0 2

Japan

Brazil

US

UK

India

Eurozone

World

China

Total value-added output: Q1 2020

Source : Oxford Economics

% quarter

Global manufacturing PMI and IP tumbled in Q1


30

35

40

45

50

55

60

65

70

-15

-10

-5

0

5

10

15

2005 2007 2009 2011 2013 2015 2017 2019

World IP (LHS)

Global PMI manufacturing(RHS)

World: Industrial production & PMI% year

Source : Oxford Economics/Haver Analytics/IHS Markit

Balance

Export backdrop and capacity utilisation are close to GFC

lows


-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2006 2008 2010 2012 2014 2016 2018 2020

World: Monthly export indicatorStandardised index

Source : Oxford Economics/Haver Analytics

Indicator based on US, German and Chinese export orders surveys

60

62

64

66

68

70

72

74

76

78

80

82

84

86

2005 2007 2009 2011 2013 2015 2017 2019

World: Manufacturing capacity utilisation% of capacity


Weighted average for US, Eurozone, UK and Japan

2000-08 average

*Latest data point excludes Japan

The trough

Q2 2020 marks the trough of a deep, but short-lived

recession…


85

90

95

100

105

110

2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1

Current baseline

Pre-coronavirus November baseline

World: Manufacturing value-added outputQ4 2019 = 100


2020 Q2

…but now it is led by the advanced economies…


-14

-12

-10

-8

-6

-4

-2

0

2

4

2020 Q1 2020 Q2

Advanced Economies

Emerging Markets

Value-added output: IP exc construction


% quarter

…with most key economies expecting a double-digit

contraction


-20 -15 -10 -5 0 5 10 15

China

World

UK

Japan

Eurozone

India

Brazil

US

Total value-added output: Q2 2020


% quarter

The global coronavirus recession hits services the

hardest…


-28 -24 -20 -16 -12 -8 -4 0

Agriculture

Communications

Financial & business services

Industrial production

Transport

Construction

Retail & wholesale distribution

Hotels & catering

Gross value-added

World: Change in output Q4 2019 to Q2 2020

Percentage change in sectoral value-added between Q4 2019 and Q2 2020


…but some manufacturing subsectors are not equally

affected


-40 -36 -32 -28 -24 -20 -16 -12 -8 -4 0

Food and beverages

Electronics

Chemicals

Metals and metal products

Industrial machinery

Electrical equipment

Furniture manufacturing

Aerospace

Motor vehicles

Manufacturing

World: Change in output Q4 2019 to Q2 2020

Percentage change in sectoral value-added output between Q4 2019 and Q2 2020


The recovery

Lockdown restrictions starting to ease across the

world…


Services to rebound to pre-virus levels (2019Q4)

ahead of manufacturing


85

90

95

100

105

110

2018 Q1 2019 Q1 2020 Q1 2021 Q1 2022 Q1

Manufacturing

Services

World*: Value-added output by sector


Q4 2019 = 100

*quarterly countries only

Recovery in China becomes visible at the start of Q2…


-25

-20

-15

-10

-5

0

5

10

15

20

2014 2015 2016 2017 2018 2019 2020

Value added industry (real)

Retail sales (real)

Fixed asset investment (nominal)

Source : Oxford Economics/CEIC

China: Key cyclical indicators% year

Data suggests social distancing has already peaked in

the US…


But investment goods should perform the strongest in

2021


-20

-15

-10

-5

0

5

10

15

20

2019 2020 2021 2022

Consumer goods

Food, beverages & tobacco

Intermediate goods

Investment goods

Manufacturing

US: Value-added output recovery


% year

Gradual easing of lockdown measures in the EU are

starting to show signs of improvement…


-50%

-40%

-30%

-20%

-10%

0%

10%

20%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Germany France UK Italy

Europe: Industrial confidence% balance


…but sectors more connected to the automotive sector will

see a stronger trough, but also recovery


-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

2019 2020 2021 2022 2023

Germany France ItalySpain Austria OtherEurozone

Source: Oxford Economics/Haver Analytics

Eurozone motor vehicles and parts: Contributions to growth

Forecast

%

South America has become the new coronavirus hub


-24

-20

-16

-12

-8

-4

0

4

8

12

H2 2019 H1 2020 H2 2020 H1 2021

Argentina

Brazil

Mexico

South America: Industrial productionAverage quarterly growth rate, %


Other possible scenarios

What if there is a new wave of infections or if a vaccine

was developed sooner?


Renewed wave of infections

• Second wave of infections in late-2020 and early-2021 leads to lockdown

measures being re-instated.

• Economic growth slows in Q4 and the global economy contracts sharply in Q1

2021.

• Policy support is limited and less effective than in the first wave of infections.

Scientific advances allows a more rapid return to normal

• A vaccine is discovered and becomes widely available in Q3 2020 (6 months

earlier than baseline).

• Lockdown and social distancing measures eased and removed by the start of

Q4 2020.

• Very strong rebound in economic growth in H2 2020 as stronger confidence

and government support boost growth.

Scenario results on world value-added output


2018 2019 2020 2021 2022 2023 2024 2025

-8

-4

0

4

8

12

Baseline

Renewed infections

Advanced recovery

World: Value-added output total industry % year


Forecast

Questions: Use the question panel on the right


2019 % share 2019 2020 2021 2022 2023 2024United States 17.6 2.1 -8.0 4.4 4.6 2.7 1.2

Eurozone 12.8 -1.0 -10.2 7.7 3.1 1.8 1.2

UK 2.2 -1.4 -8.4 5.8 2.6 -0.9 0.6

Eastern Europe 2.0 2.3 -5.8 6.6 3.6 2.8 2.2

Japan 6.2 -2.5 -8.4 3.4 3.1 1.9 1.2

China 27.4 6.0 -0.6 6.9 3.9 4.3 3.8

India 3.0 1.3 -6.9 7.8 6.5 6.6 6.6

Russia 2.0 1.2 -7.2 3.0 3.0 2.7 2.2

Brazil 1.5 0.2 -10.7 9.8 5.1 2.8 2.5

World 100.0 1.7 -5.6 5.8 3.9 3.2 2.6

World: Industrial production forecasts(Annual percentage changes unless specified)

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coronavirus pandemic sees global industry heading into a deep … · coronavirus pandemic sees...

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