The United Nations Industrial Development Organization (UNIDO) says it expects an 8.4% decline in global manufacturing value for this year, which would make 2020 the worst year on official records for the sector.
In the second quarter of 2020 (April to June), global manufacturing output fell by 11.2% compared with the same quarter in the previous year, according to official figures from the organisation.
The dramatic drop reflects the economic impact of measures imposed to halt the spread of COVID-19, which overshadowed all other negative influences on the sector, including higher trade barriers and the impact of Brexit.
UNIDO anticipates ongoing disruptions to manufacturing over the coming months as the world continues to grapple with the impact of the pandemic.
“Based on this scenario, and developments in manufacturing linked to other economic variables, UNIDO is forecasting a fall in global manufacturing value-added of 8.4% in 2020, which would mark the biggest collapse in output since official records began,” Fernando Cantú, UNIDO’s chief statistician, said.
China out on a limb
It is likely some countries will be harder hit than others, with China expected to record a more modest drop of 1.6% compared with the United States and Europe’s industrialised economies, where value-added in 2020 is forecast to plummet by 15% and 14.3%, respectively.
However, Cantú said more time was needed to assess the full impact of containment measures on households, businesses and government balance sheets.
He added: “Recent developments in several countries point to a possible second wave of the pandemic, which could require the return of harsher economic restrictions, with knock-on effects on supply and demand.”
Figures for the second quarter show a wide divergence between China and the rest of the world, as well as between and within developing and industrialised 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.
By the second quarter, China’s manufacturing output had already returned to growth, increasing by 2.8% year-on-year, led by industries such as computer electronics (11.2%), electrical equipment (6.8%) and machinery (6.3%).
Gloomier picture
On the other hand, the data for developing and emerging industrial economies (excluding China) shows a markedly gloomier picture, with second-quarter output plunging by 22% on the year, following a 2.3% drop in the first quarter.
The hardest-hit geographical region was Latin America, where manufacturing output fell by 24.2% year-on-year, followed by Asia and the Pacific, which suffered a 23.7% drop.
In industrialised economies, second-quarter manufacturing output sank by 16.4% as recessions started to bite in many major economies. Manufacturing production in Europe dropped by 19.3%, making it the worst-affected industrialised region, according to the UNIDO report.
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.
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