Manufacturing output starting to pick up slowly, with a long journey back to the pre-crisis levels ahead
The gradual fading of the COVID-19 shock was mirrored by the development of the manufacturing output: a steep dive in April was followed by a cautious recovery in May and a more vigorous rebound in June. At the same time, turnover continued on a slightly downward trend in May, and also grew significantly in June (see Chart 1). This strong recovery was primarily underpinned by an increase in export value. Alas, despite the improvements observed over the most recent months, the fall has been impressive and the overall second quarter results are weak: –5.1% quarter-on-quarter and –6.1% year-on-year.
Chart 1. Manufacturing output (volume index) and turnover (2015=100%)
Industrial confidence surveys show continued improvement also in July, with the outlook for both employment and export orders on a rise (see Chart 2). Nevertheless, confidence remains significantly below the pre-crisis levels.
Chart 2. Industrial confidence and select survey questions (%)
The rate of capacity utilisation in manufacturing also increased in the third quarter as compared to the second quarter, albeit remaining below the pre-crisis level. Chart 3 shows a comparison with the capacities of the last year's third quarter, with a contraction evident in virtually all sectors. The most significant falls were observed in the sectors of printing, manufacture of textiles and wearing apparel as well as high technologies (particularly, manufacture of electrical equipment).
Chart 3. Capacity utilisation in Q3 2020 vs Q3 2019 (year-on-year; percentage points) and changes since 2004 (2019 weighted)
A high degree of uncertainty prevails, with various restrictions remaining in place and many countries experiencing new flare-ups of coronavirus. Moreover, the usual autumn flu season is also yet to come. In light of all that, the chances of manufacturing bouncing back to the pre-crisis levels already this year most likely are less than slim.