Factory performance takes a beating in February

MANILA, Philippines — Purchasing managers indexes (PMI) for the manufacturing sector in Emerging Asia will likely reflect the effect of the coronavirus disease 2019 (COVID-19), London-based Capital Economics said over the weekend.

January PMIs for most of Emerging Asia registered improvements over December as it pre-dated the disruption to industry from COVID-19 outbreak.

“The virus is likely to have weighed heavily on the February readings, which we expect to fall sharply,” Capital Economics said.

While flash PMIs for developed markets have mostly held up, suppliers’ delivery times and stocks of purchases sub-indexes pointed to disruption in supply chains because of the outbreak.

In another research note earlier this month, the macroeconomy research firm said the spread of the virus has exposed vulnerability in global supply chains. As such, industries may evaluate the need to maintain large and complex ones.

Capital Economics chief economist Neil Shearing said the extent of disruption caused by the virus would likely make global businesses more attuned to the effects of future pandemics to doing business through supply chains across countries.

Among the possible reactions would be for some firms to re-shore some aspects of manufacturing that were previously outsourced to emerging economies and rely more on frontier technologies like 3D printing.

While it may be difficult to predict how COVID-19 will continue to affect the global economy in the coming months, Capital Economics said governments worldwide may already be adding global pandemics to  the list of factors that threaten globalization and their individual economies.