Companies in the United States are expecting to lead the recovery of output lost due to the COVID-19 pandemic, according to a new survey from IHS Markit, although Chinese firms have so far suffered the smallest hit.
On average, businesses expect to have recouped output lost due to the pandemic by the end of the year, with average expectations of just three months in the U.S. and China. The longest average recovery is seen in the U.K. at nearly nine months. Hotels, restaurants and other consumer-facing services are anticipating the longest recoveries and the greatest likelihood of a permanent loss of output.
All sectors report output to be lower an average than before the pandemic. The steepest losses have been seen in the hotels and restaurants sector, transport manufacturing, and textiles and clothing. Faring better have been delivery companies and telecoms services, chemical and plastics firms, and food and drink manufacturers.
“The survey reveals a surprisingly short anticipated path to recovery for companies on average, which will help ferment expectations of a v-shaped recovery for many markets,” Chris Williamson, chief business economist at IHS Markit, said. “Firms in the U. S. and China are particularly optimistic, while Japanese, Indian and Italian firms are especially downbeat, although even in these countries, average recovery paths are measured in months not years. Such optimistic expectations are encouraging, but setbacks along the way, such as that currently being seen in the U.S., seem likely.”
Williamson said persistent weak demand and ongoing social distancing measures until an effective treatment or vaccine for the coronavirus are available will also be a challenge for firms.
“The longest recovery paths are seen for companies in the hotels, restaurants, clothing, transport and vehicle manufacturing sectors, reflecting the persistent need for social distancing, quiet high streets and a lack of demand for travel and tourism,” he added.
The survey, undertaken in June, asked companies to report whether output had risen or fallen since the start of the pandemic and to offer guidance on when any loss would be fully recouped, if ever. The survey was conducted simultaneously in 12 countries, directed at companies that participate in IHS Markit’s manufacturing and services PMI surveys. Responses were received from 6,887 companies. Retail, energy, construction and government entities were not included in the survey.
About two-thirds of all companies reported output running below pre-pandemic peaks, with just 8 percent reporting that their output was higher in June than prior to the coronavirus outbreak, which first escalated in February. A further 27 percent reported that current output matched pre-pandemic peaks, meaning that just over one-third of firms globally reported their output to have either matched or exceeded pre-pandemic peaks.
However, 65 percent reported that output remained below pre-COVID peaks, resulting in a net balance of those reporting an increase minus those reporting a decline of minus 57 percent.
Firms in China reported the smallest output loss compared to prior to the pandemic, linked to the Chinese economy having been locked down relatively early and consequently opened up earlier, followed by the U.S.–the only two economies to see output losses below the global average. The greatest loss of output was reported by companies in India and Brazil, which are two of the economies that continued to endure relatively tight restrictions to contain the COVID-19 outbreak in June, IHS said.
Survey data indicates that of the 62 percent of firms that are waiting and still expect to recover lost output, the average recovery time is five months, ranging from an average of almost nine months in the U.K. to just three months in the U.S. and China.