A worker at a factory that produces metal bearings in Italy, where manufacturing has been hit hard by the pandemic.
Photo: massimo pinca/ReutersFactory output plummeted across Asia and Europe during April, according to surveys of purchasing managers, as efforts to limit the spread of the novel coronavirus dealt a blow to the global economy that has few precedents in its breadth and abruptness.
From India and Indonesia in Asia to Poland and Greece in Europe, purchasing managers at manufacturing businesses told data firm IHS Markit the same story: April saw the sharpest fall in output and other measures of activity on record.
Similar surveys for the U.S. released Friday painted a similar picture.
With many countries already easing restrictions on movement and social interaction, and more to follow in May, governments, businesses and workers will hope that last month marked the high point in terms of the economic cost of containing the pandemic.
But a quick rebound to the level of activity recorded before the first lockdowns were imposed in January is unlikely.
“Steps needed to keep workers safe will mean even businesses that are able to restart production will generally be running at low capacity, and most will be operating in an environment of greatly reduced demand,” said Chris Williamson, chief business economist at IHS Markit.
In terms of the affected population, India imposed the largest lockdown during April, and the Purchasing Managers Index for manufacturing in the world’s second-most populous country recorded the economic cost. The measure collapsed to 27.4 from 51.8 in March, one of the swiftest swings from growth to sharp contraction that has been recorded globally. A reading above 50.0 indicates a rise in activity, while a reading below that level points to a decline.
Indonesia’s manufacturing sector contracted at almost the same pace, again reflecting extensive lockdowns. In both countries, factories said they had laid off workers at a record pace.
The surveys also showed record declines in manufacturing activity in the Philippines, Malaysia and Vietnam, while in Taiwan and South Korea the contractions were the deepest since the last global financial crisis.
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South Korea’s government decided against the broad lockdowns enforced by many other countries, instead relying on voluntary social distancing and widespread testing to identify people infected by the virus, and trace and isolate those they had contact with.
But its manufacturing sector also contracted in April, hit by the sharpest drop in exports on record. IHS Markit said that even when factories had overseas orders to meet, they reported difficulties in shipping goods to customers in Japan, Taiwan and India.
In Europe, the surveys showed that Greek factories experienced the largest decline in activity during the month, followed by Spain and Italy. While northern European countries such as the Netherlands and Germany also reported declines, they were much more modest. That divide is feeding political tensions over how and whether to share the burden when mending the economic damage caused by the pandemic.
Fifty-seven economists surveyed by the European Central Bank expected to see a “tick-mark” economic recovery in the eurozone, with a very sharp drop followed by a slow rebound.
They expect the eurozone economy to shrink 5.5% this year before rebounding 4.3% next year. In the last survey three months ago, they had forecast growth of 1.1% this year and 1.2% next year.
“A large degree of normality is not likely to return before the third quarter,” with some business restrictions continuing even then, the ECB said Monday.
By 2024, the eurozone economy will still be 3% smaller than the economists had expected three months ago, they said. The economists expect to see a period of very low inflation in the eurozone, rejecting suggestions that supply-chain bottlenecks and aggressive money-printing by central banks could push up consumer prices.
Across Asia and Europe, manufacturers said they were laying off workers at a record pace. But in Europe, the rise in unemployment is being damped by government schemes that cover wage bills for furloughed workers as long as companies keep those employees on their books. The survey of Swiss purchasing managers found that 59% of manufacturers had applied for that country’s program, seeking help to pay the wages of 34% of factory workers.
Write to Paul Hannon at paul.hannon@wsj.com and Tom Fairless at tom.fairless@wsj.com
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