| 6 MINUTE READ

Coronavirus and the Coating and Finishing Industry

PF checks in with Michael Guckes, chief economist for Gardner Intelligence for an update on how the manufacturing industry is trending during the coronavirus situation.

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coronavirus, COVID-1, manufacturing

It’s day 3 of “social distancing” as I write this. I’m sure many of you are having some of the same conversations, the same nervous jokes, the same struggles of balancing your work and home life — particularly, if like me, you have kids who are also now at home with the threat of no school for the rest of the year looming large. 

The implications of the coronavirus outbreak seem increasingly real all the time. When I talk to shops they talk about the short term of it all. While everyone is dealing with the struggles of maintaining some sense of normalcy and productivity, for most shops it seems people are still able to work, parts are still being made. For now, it doesn’t seem to have impacted the day to day of “making stuff.” 

But the short term of a world reacting to the coronavirus isn’t the only thing to worry about. As we all navigate the evolving COVID-19 situation, it's important to think through the different possible scenarios and carefully consider short term reactions that might impact your long term business strategy.

PF checked in with Michael Guckes, chief economist for Gardner Intelligence for an update on how the manufacturing industry is trending during this time of uncertainty.

 

 

 

 



Transcription:

 

PF: Everyone's thinking a lot about their business and supply chain during the coronavirus outbreak. wanted to check in with Michael Guckes, our chief economist for Gardner intelligence, which is the research arm of Gardner Business Media. Michael also writes a column for us based on the Gardner Business Index, the GBI, which measures the health of manufacturing industry. Michael, what can you tell us about what this all means for coaters and finishers?

MG: Yeah, Scott, thank you for your time. So I've got a short couple of slides I'm going to show here. And what we're going to see is we're going to see what is happening in China, and then we're going to see what the impacts could be in the United States. So let me show you what I've got for you.

I'm gonna start with the Chinese manufacturing Purchasing Managers index or PMI. This is a overall look on a month to month basis of China's manufacturing activity, we can see that at the end of February, it hit a multi-year low of 35.7. If we look at the components that drive that overall economic number, we can see that production fell the steepest to 27.8. At the end of February, it was followed by new orders, and employment. All of the components of the manufacturing PMI in China, of course, fell in February.

So on a month to month basis, we're seeing clearly a lot of slowdown. But on the flip side, if we look at coal consumption and Chinese power plants, which of course is representative of electricity consumption, we're seeing that in the most recent weeks here, roughly five weeks after the Lunar New Year, which was right at the end of January, we can see that coal consumption is actually increasing and it's trending upward back towards more normal levels. So that tells us that the economic slowdown in China, it has lasted roughly four to five weeks here with some rebound already occurring. That may give us some idea of what we might expect in the rest of the world.

If we look at the GBI, finishing index, what we see during the second half of 2019 was an accelerating contraction in business conditions. And yet, if we look at January and February numbers, they were actually moving closer to 50 telling us that that contraction was slowing down, which is a very good thing. All right. I think we could have expected the finishing index to rebound above 50 sometime in 2020. But we look at the components of the finishing index here in the most recent month. Again, that being February we see that the index was led by supplier deliveries and production, both of which were above 50 telling us that they were expanding.

 And then some of the things that Gardner intelligence is doing on a weekly basis right now, we have a survey that is going out each week to manufacturers, asking them about the impact the COVID-19 is having on different elements of their business. And so you can see here, the colored bars represent the survey data from the period ending March 16. And what it's telling us, for example, if we look at parts availability is is that more than 60% of respondents said that parts availability was experienced a moderate impact from Cova 19. If you look at, for example, those gray bars those gray bars that are overlaying with the orange bars, those represent the prior week's results. And so we can see that there was certainly some change here on a week to week basis, we will continue to do this survey. So please see gardnerintelligence.com/blog for updates of this weekly survey and for more information.

And lastly, action items for manufacturing decision makers and business owners. I think we can prepare for a sharp V shaped recovery. Again, looking at the Chinese data, they struggled greatly for roughly five to six weeks. And now they're already appear to be recovering using, again coal consumption and energy consumption as a proxy for overall economic growth.

One of the things that I would suggest that your readers and your subscribers consider is to focus on data driven decisions, right. Nobody was able to prepare for the contraction, the economic challenges that COVID-19 has already brought upon us but as business owners and decision makers, your ability to be aware of when things will rebound is entirely within your control, timing and how you make business decisions on the rebound side of this event will be crucial to your firm. So Just protect your company's flexibility to respond to that rebound. You don't want to make long term decisions now that will be hard to undo. If in the near term, we see business conditions improve. So what this may mean is that you're going to have to make investment decisions that don't necessarily sit easy with news headlines. And those could be things like what do we do with employees? If you were to release your employees today, and it takes many months to bring them back or to hire new ones, and yet the whole coronavirus situation resolves itself much sooner than that, then you could find yourself shy of employees, for example, when you really need them on the rebound side. So those are the kinds of things that we're tracking. And these are the kinds of things that we can help small businesses and other manufacturers think about in the coming weeks and months.

PF:  We should also say that during this time, it's really important to stay involved in this conversation. So make sure that you're filling out that survey from Gardner Intelligence. And if you have any questions feel free to reach out to me at sfrancis@pfonline.com and stay tuned to pfonline.com for news and updates as we all sort of go through this situation together. Thanks very much everyone and stay well.

 

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