China’s Continuous Growth Felt a Hit in October
China, the manufacturing hub of the world, continued its activity expansion and growth as the second-largest economy, globally, in October for the eighth consecutive month. But, reports suggest that the economic powerhouse’s growth is slowing ─ or, it’s at least slower than the month prior ─, according to the National Bureau of Statistics. The growth across 2020 has been exponential when you consider the damage that the COVID-19 pandemic wrought on global supply chains and China as a whole.
Industry-leaders and analysts in the manufacturing space are always closely watching the (PMI) to gauge the manufacturing activity and outlook in China, and data trends suggest that post-February, courtesy of robust pandemic-control measures, the People’s Republic has been on a constant bounce-back.
From the Bottom to the Top
Back in October, the stood at 51.4, which was 0.1 below the September figure. 51.4 isn’t bad, though ─ on the PMI scale, any figure above the 50-point mark indicates that a company is growing, while below resembles shrinking. To put China’s growth into context, back in February of this year, the nation’s manufacturing PMI plummeted all the way down to 35.7 points when the pandemic first went global.
According to Zhao Qinghe, a senior statistician at the National Bureau of Statistics announced that this month’s figures, with increasing in several key indices, including exports, imports and now orders, demonstrated a “quick recovery.”
“Manufacturing in major economies is bouncing back... and a recovery in demand has driven up prices,” Zhao added. When discussing the key factors of growth, Zhao suggested that chemical products and raw materials, plastic products, textiles, and rubber ─ all of which were used to fight the virus ─ played a key role.
Industry-wide Growth Surges
Outside of manufacturing, China’s wider-PMI score has hit 55.2 points, which sees a growth of 0.3 year-on-year. All of these statistics indicate that China, for all the struggles of this year, has managed to be resilient in the looming shadow of COVID-19 and that it’ll likely record the strongest economic growth, globally, in 2020.
The nation’s growth stands out so much that the (IMF) has nearly doubled its in 2020 to 1.9 per cent amid its strong recovery and its ability to continuously provide PPE and other products to global markets that are in desperate need, in their fight to resist the adversity of the pandemic’s second and, in some cases, third waves.
"The second wave of Covid-19 outside China could bolster China's exports but may also delay the full recovery of China's services sector, as Beijing still needs to stay alert," said Lu Ting, chief China economist at Japanese bank Nomura.
But an extended pandemic "may eventually dampen demand for China's exports if the purchasing power in overseas economies diminishes and they adjust their manufacturing to the new normal", he added.
IHS Markit/CIPS: UK Manufacturing PMI near-record high
UK manufacturing trends
For the UK manufacturing sector, growth of output and new orders were both reported by IHS Markit and CIPS as among the best seen over the past seven years, which in turn has led to a strong increase in employment. Despite this, the sector continues to face supply chain delays and input shortages, which resulted in increased purchasing costs and record selling price inflation.
UK Manufacturing IHS Markit/CIPS Purchasing Managers’ Index® (PMI®)
Seasonally adjusted, IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) rose to 60.9 in April, which was an increase compared to March (58.9) and above the estimated 60.7 for April.
Increasing for the eleventh consecutive month, the latest readings are the highest since July 1994 (61.0). The output growth for April has been attributed to the loosening of lockdown restrictions, improving demands and a rise in backlogged work.
“The manufacturing sector was flooded with optimism in April as the PMI rose to its highest level since July 1994, bolstered by strong levels of new orders and the end of lockdown restrictions opened the gates to business. It was primarily the home market that fuelled this upsurge in activity though more work from the US, Europe and China demonstrated there were also improvements in the global economy. This boom largely benefited corporates as output growth at small-scale producers continued to lag behind,” said Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply.
In addition to expanding production, total new orders rose for its third consecutive month, which was attributed to a revival of domestic market conditions, stronger client confidence, parts of the economy reopening and improving global market conditions.
While new exports rose in April, the rate was reported as weaker in comparison to new orders. “Companies reported improved new work intakes from several trading partners, including mainland Europe, the US, China and South-East Asia. Large-sized manufacturers saw a substantial expansion in new export order intakes, compared to only a marginal rise at small-sized firms,” said IHS Markit/CIPS.
UK Manufacturing’s outlook
Remaining positive at the start of the second quarter, 66% of companies forecast that output will be higher in a year's time, which is attributed to expectations for less disruption related to COVID-19 and Brexit, economic recovery, improved client confidence and new product launches.
“Further loosening of COVID-19 restrictions at home and abroad led to another marked growth spurt at UK factories. The headline PMI rose to a near 27-year high, as output and new orders expanded at increased rates. The outlook for the sector is also increasingly positive, with two-thirds of manufacturers expecting output to be higher in one year’s time. Export growth remains relatively subdued, however, as small manufacturers struggle to export,” said Rob Dobson, Director at IHS Markit.
Adding to comments from IHS Markit and CIPS, , Managing Director of Freight and Logistics at Accenture Global said: “While today’s figures are positive overall, the worsening supply situation is still a concern, with rates of both input costs and selling price inflation running far above anything previously seen. Shipping delays and material shortages are driving huge backlogs of uncompleted work and the surge in manufacturing orders is leading to many firms struggling to boost operating capacity to keep up with demand. With business expectations becoming even more optimistic as the economy rebounds, the big question will be whether firms will be able to cope with the surging inflows of new orders.
“As ongoing supply chain issues are still at large, companies with wide international footprints should look to reassess their logistics strategies by running supply chain stress tests and simulations in order to respond quickly to upswings and variability in demand. A flexible and resilient supply chain will be a key way for businesses to remain both competitive and stable as we emerge from the pandemic”