Manufacturers Overcame Covid-19 Setbacks to End 2020 on High Note

Economists expect that divergence to be a feature of the global economy well into 2021, and until vaccines are distributed broadly enough to ensure widespread immunity against Covid-19.

Surveys of purchasing managers at factories across Asia and Europe that were released Monday recorded strong rises in activity during December, with Taiwan’s manufacturing sector recording its strongest month in almost a decade. The results of a similar survey of U.S. manufacturers, to be released later Monday, are expected to also point to a strong increase in activity.

While Europe has seen a rise in infections that will likely prompt governments to extend current restrictions, its manufacturers continued to report a recovery from the sharp declines in output that accompanied the pandemic’s first wave and the lockdowns that accompanied it.

Data firm IHS Markit said its purchasing managers index for the eurozone’s manufacturing sector rose to 55.2 in December from 53.8 in November, reaching its highest level since May 2018. A reading above 50.0 points to an increase in activity from the previous month, while a reading below that level points to a decline.

“The solid performance of manufacturing amid the tightening of Covid-19 restrictions in the closing months of 2020 represents a major contrast to the lockdowns earlier in the year, with factories acting as a crucial support to the economy as the service sector is hit by tough social distancing measures,” said Chris Williamson, IHS Markit’s chief business economist.

Europe’s factory revival has been led by Germany, which is seeing strong demand for its exports. The country’s PMI rose to its highest level in almost three years during December.

Japan, another leading exporter of manufactured goods, saw its PMI rise to its highest level since April 2019, while South Korean factories reported the same strong growth in activity as in November.

By contrast, China’s Caixin PMI for the manufacturing sector fell slightly, partly reflecting a cooling of demand for the country’s exports. During the pandemic, protective gear and work-from-home tech products have served as pillars for China’s overseas trade, helping it gain global market share.

Despite the lengthening recovery, the surveys of purchasing managers indicate that many factories around the world continue to cut payrolls. That suggests that many remain cautious about their prospects in 2021, even as the deployment of vaccines gets under way.

Write to Paul Hannon at [email protected]