Letter IEDI n. 1034–COVID-19's impact on global industry
According to UNIDO's (United Nations Industrial Development Organization) quarterly report, world industrial production registered a sharp contraction in the second quarter of 2020, deepening a downward trajectory that started in 2018.
The decline in manufacturing output in Q2/20 reached -5.6% compared to the previous quarter (after adjusting for seasonal effects) and -11.2% in relation to the same period last year. These figures resulted from the COVID-19 pandemic, which strongly affected all groups of countries.
Much of this was due to the poor performance of medium-high and high technology intensity industries, which congregate many branches of capital goods and consumer durables. Together, they fell 10.4% in Q2/20, leading the industrial decline.
In addition to the direct effects of the pandemic, the demand for these more technologically intensive products was also harmed by the higher uncertainty, which hampered investment and consumption decisions for durable goods.
According to UNIDO, in industrialized nations the decline in manufacturing as a whole reached 16.4% in April–June/20, following a 2.4% decrease in the previous quarter, versus the equivalent periods of 2019.
This performance involved all countries in the group: in North America, there was a 16.5% decrease, in European countries the losses reached 19.3% and the developed countries of Asia registered -12.9% in the interannual comparison.
In the emerging and developing economies, in turn, given their level of work informality and the higher difficulties to adopt large and effective emergency plans, the industrial decline was even more accentuated. Manufacturing decreased 22% in these countries compared to Q1/20 and 20.3% in relation to Q2/19.
Among the emerging markets, Latin America continued to be the negative highlight: -24.2% in Apr–Jun/20 compared to the same quarter of the previous year and -21.4% versus Q1/20. This result was mainly due to the negative figures for Brazil (-22.1%), Argentina (-22.6%) and Mexico (-29.8%).
China, the first country hit by COVID-19, had more concentrated losses in Jan–Mar/20, reaching -13.9% compared to the same period last year. In Q2/20, however, recovery had already started, with an increase in industrial production of +2.8%.
For 2020 as a whole, UNIDO's projections for the Chinese manufacturing industry continue to point to a +5.5% growth, that is, a positive rate, but lower than in previous years.
Based on data from the OECD, Eurostat and the countries themselves, the IEDI updated an international ranking of industrial production growth for forty-three countries, with 2020 data up to the beginning of the second half of the year.
Among these 43 countries, Brazil ranked 26th, with a 9.7% decline in the year to Jul/20. Even so, it was ahead of countries like the United Kingdom (-11.4%), Germany (-14.5%), Spain (-15.2%), France (-15.4%) and Italy (-18.3%).