Significant national variations shown in the HIS Markit COVID-19 recovery survey

Significant national variations shown in the HIS Markit COVID-19 recovery survey

December 2020

According to IHS Markit, a global survey of over 6,500 companies shows firms in China are expecting to lead the recovery of output lost due to the COVID-19 pandemic, with the USA close behind.

Firms in India report the slowest recovery prospects, followed by Japan, Spain, Italy, and the UK.  However, all countries have become more upbeat about recovery progress since an earlier survey, conducted in June, with the exceptions of India, Spain, and France.  Brazil has seen by far the biggest improvement in recovery prospects.

Hotels, restaurants, and other consumer-facing services are anticipating the longest recoveries. Transportation and storage, likewise, remain especially hard-hit, alongside basic metal goods makers.  Food, drink and vehicle makers – and, in particular, auto producers – are the most upbeat.

The COVID-19 survey, undertaken in late-October, asked companies to report whether their output had risen or fallen since the start of the pandemic. For those companies where output remained below its pre-pandemic peak, firms are asked to give guidance on when any remaining loss would be recouped, if ever.

Responses were received from 6,653 companies in October, with retail, energy, construction, and government entities excluded from the survey.

Looking at an overall gauge of COVID-19 recovery progress, which takes into account the proportion of firms that have already met or exceeded pre-pandemic output peaks and the expected recovery times for the remaining companies, firms in China are the most upbeat regarding the recovery path followed by companies in the US.  Firms in India have the lowest recovery expectations, followed by Japan, Spain, Italy and the UK.

By sector, food and drink companies see the fastest recovery paths followed by vehicle manufacturers.  Hotels and restaurants see the longest recovery path, followed by ‘other’ services (which principally comprises consumer-facing services not elsewhere classified plus sporting and other outdoor activities). Transportation and storage likewise remains especially hard-hit, alongside basic metal goods makers.

Looking at how recovery prospects have changed by sector since the June survey, vehicle makers have seen the biggest improvement globally, while the ‘other’ services category (mainly comprising consumer-facing businesses) has seen a notable downward shift in expectations, as have post and telecoms, and chemicals and plastics manufacturers.

Looking at current operating levels, some 51% of companies globally continued to operate with output below their pre-pandemic peaks as of mid-October, albeit an improvement from 65% as of mid-June.

Of the remaining 49%, only 14% have seen output rise above the prior peak. That compares with 8% having regained the prior peak back in June, suggesting only a modest further recovery since June, with only an additional 6% of firms having breached prior output peaks over the July to October period.

The global net balance of recovery, calculated as the percentage of firms having seen output rise above the prior pandemic peak minus those reporting that output remains lower, consequently stands at -37%.

That compares favourably with -57% back in June but still indicates a large shortfall of global output lost to the pandemic.

The net balance figures indicate that China has so far made the greatest progress in closing the shortfall in output lost to the pandemic, followed by the US and then Brazil. The latter, however, is notable in having seen the biggest improvement in progress since June.

At the other end of the scale, India continues to report the biggest loss of output, also being the only country to see the drop in output deepen further since June.

Spain and Italy have also seen poor recoveries so far, with Japan, France, and the UK also in the bottom half of the current recovery ranking table.

By sector, all major sectors covered by the survey continued to report current output to be running below pre-pandemic peaks on average, as reflected in negative net balances.

The steepest loss of output so far continued to be reported in the hotels & restaurants sector, followed by ‘other’ services (which principally comprises consumer- facing services not elsewhere classified plus sporting and other outdoor activities). Transportation & storage likewise remains especially hard-hit.

Future recovery paths for lost output
Looking at expected future recovery paths, although 51% of companies globally are still waiting to recover lost output, 8% expect to have regained their prior peaks within three months, with a further 11% within six months. An additional 11% expect to have recovered within the next year.

Only 9% of firms globally expect the recovery to take between 12 and 24 months, though a further 4% anticipate the recovery exceeding two years.

Unfortunately, 3% of firms globally never expect to regain their pre-pandemic output peaks, up slightly from 2% back in June. However, the figures vary markedly, ranging from zero companies in the US and China to 13% in Japan.

By sector, the most common expectation of a permanent loss of output was seen in the hotels & restaurants and textiles & clothing manufacturing sectors.

The survey data therefore implies that, of the 48% of firms that are waiting (and still expect) to recover their lost output, the average recovery time is five months, ranging from an average of 13 months in India and 10 months in Spain to just two months in China and three months in the US.

Commenting on the survey, Chris Williamson, Chief Business Economist at IHS Markit, said: “The survey indicates encouraging overall progress in the global economic recovery from the COVID-19 outbreak, which was declared a pandemic after spreading globally in March, but trends have been very varied, both by country and sector. Notably, some countries and sectors have made less progress than anticipated when the survey had previously been conducted back in June, reflecting disruptions caused by further waves of virus infections.”

“Companies in China have not only reported the greatest success so far in recouping output lost to COVID-19, but also anticipate making the fastest full recovery, though US companies come a close second. Given that the outbreak and associated lockdown occurred earlier in China, this represents very encouraging progress for the US.”

“High levels of infections, and second waves of the outbreak, have nevertheless meant many countries have achieved less progress than had been signalled when the prior survey was conducted back in June. Most notable are India, Spain and Italy, where recovery prospects reported by companies have even taken backward steps.

“Similarly, the virus has had a bigger and more prolonged impact than previously expected on recovery paths for many consumer-facing service companies in particular, which continued to lag the overall recovery. Perhaps not surprisingly, hotels and restaurants are anticipating the slowest recovery paths.

“While it was perhaps to be expected that food and drink companies would lead the recovery, reflecting the sustained need for such non-discretionary purchases, vehicle manufacturing is a stand-out performer, a large proportion of which is accounted for by auto makers, which has reported the biggest improvement in recovery prospects over the past four months.”

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