Whatâs Going On Here?Manufacturing activity slumped to a record low in China as coronavirus hobbled the nationâs factories â and data from the rest of the world showed signs that the economic impact, like the outbreak itself, is continuing to spread. What Does This Mean?Data out on Monday showed Chinaâs manufacturing activity fell to the lowest level last month since the survey began. It is, after all, pretty difficult to run a factory if half your employees are sick or staying home to avoid infection.
But the consequences arenât just domestic. China is the worldâs second-largest economy, not to mention more integrated than ever in global supply chains. In fact, the countryâs responsible for producing about 65% of components for the worldâs technology companies, and assembling 80% of all electronic products. And that means the slowdown is being felt elsewhere too: separate reports indicated that European output was decidedly mixed, and that US manufacturing unexpectedly stagnated in February. Why Should I Care?For markets: Wait and see.
Markets started reacting to coronavirus well before this data: investors, worried about the outbreakâs effect on the economy, sold stocks all last week and hunted out safer assets like US government bonds. Over the coming weeks theyâll continue to scour economic data for clues on how the global economyâs holding up, but it can take weeks â or even months â for generally backward-looking stats like factory output to catch up with the real-world situation.
The bigger picture: Economic eccentricity.
Such a sudden and severe disruption to global manufacturing is causing some downright weird data. Take, for example, Chinaâs inability to supply American customers with goods, which pushed up so-called âsupplier delivery timesâ from 52 to 58 days. Thatâs normally a positive sign for the economy, since it suggests demand is outpacing supply. This time around, however, it just goes to show how disruptive efforts to control the virus have been on supply chains. | 