COVID-19 IMPACT SURVEY MAY 2020
The worst affected industry in this pandemic driven crisis is manufacturing with its complex supply chains, labor intensive processes, and interdependencies. Division of labor, modular manufacturing strategies, outsourcing to reduce costs and increase the efficiency, consistency, and quality of each operations, have made the manufacturing sector most vulnerable amid the lockdown restrictions. A revised outlook pegs the global market for machine tools at US$87.4 billion by 2027. An indication of the grim state of affairs is the fact that global manufacturing PMI is already declining and will fall to an estimated all-time low of 35.4 points in 2020 as compared to 53.8 in 2019. This indicates severe contraction of manufacturing activity including new orders, production, employment, supplier deliveries, inventories, customers' inventories, commodity prices, order backlog, new export orders, and imports. Business investment confidence is tumbling amidst poor demand, falling profits, liquidity crunch and a reeling global economy. The "great lockdown" of 2020 has crushed the global economy and with it the manufacturing sector. The COVID-19 pandemic will have lasting long-term economic, social and political impact. As death tolls continue to rise worldwide with the infections showing no signs of slowing down, a major change in priorities is underway as governments struggle amid the crisis to strengthen their healthcare systems. The pandemic has laid bare the unpreparedness of health systems in countries worldwide. To curb the pandemic, governments have and continue to impose strict lockdowns and ban on all non-essential business operations, thus bringing all economic activity to a virtual halt. SMB manufacturers will be worst affected with over 50% of SMEs voicing uncertainty over their companies' ability to survive the corona virus-related shutdown.
As businesses struggle to keep afloat, job cuts and bankruptcies are expected to rise sending millions into unemployment. Unemployment rates are climbing to worrisome levels in both developed and developing economies alike. In the US alone, over 5. 2 million people have filed for unemployment claims over the last 1 month. The economic anxiety among consumers has and continues to rise. Consumers have shifted to online and are spending much lesser than before the pandemic. Social outlook against this background remains grim with households expected witness erosion in wealth. Personal financial outlook, community, economy, job security confidence, purchasing and investment confidence are all tumbling as the human and economic cost of the global pandemic rises. The loss in consumer confidence and erosion of household wealth and discretionary spending will impact virtually every industry and business worldwide. Global merchandize trade is expected to plummet by15% to 30% in the year 2020highlighting the magnitude of disruption. Against this backdrop, it requires very little speculation to measure the impact on manufacturing. In the United States alone over 80% of manufacturers are bracing for losses. The impact will mean crunch on capital resources; workforce layoffs/reduction and loss in productivity; supply chain disruptions; difficulties with funding; and increase in cyber security risks and fraud. Unlike IT services where work is being carried out remotely via internet and cloud platforms, for the manufacturing industry, plant activities and production cannot be carried remotely and therefore remains worst affected. The slower economic activity means reduced demand for industrial and consumer goods and lower manufacturing orders.