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PMI slump may underestimate coronavirus hit

  • The collapse in the EM manufacturing PMI to an 11-year low in February all but confirms that EM growth has fallen to its weakest rate since the global financial crisis. But the survey is yet to fully capture the disruption from coronavirus on EMs outside China.
  • The EM manufacturing PMI slumped to 44.6 last month, its lowest level since March 2009. This was almost entirely driven by the drop in China’s Caixin index to just 40.3. (See Chart 1.) That’s no real surprise given the large disruption to Chinese industry from the coronavirus outbreak, with factories closed across the country. Moreover, while the scale was smaller, the indices for Korea, Vietnam and Taiwan also fell sharply in February (see here), reflecting these countries’ close supply chain exposure to China.
  • There was little evidence of the coronavirus damaging activity outside of Asia. For instance, Turkey’s index jumped to a two-year high, suggesting that the economy is motoring along at a brisk pace. The surveys also strengthened in major EMs including Brazil, Mexico and Russia. (See Chart 2.)
  • But there are two key reasons why the headline PMIs probably understate the hit to EM activity from the coronavirus. First, the large drops in the suppliers’ delivery times component of the PMIs in most countries added to headline indices. (See Chart 3.) This index is inverted as, in normal times, longer delivery times reflect strong demand causing bottlenecks. But now, it is a symptom of disruption to production.
  • Second, the February survey period preceded the jump in cases outside of China. Most surveys were conducted around 12th to 20th February, yet there has been a surge in coronavirus cases since then. (See Chart 4.) This is particularly so in Korea where measures taken to contain the virus, including a shutdown of Daegu (the country’s fourth largest city), will limit manufacturing activity.
  • Containment measures in less affected countries, including some in Emerging Europe and Latin America, should also impact production and demand in the coming months. The upshot is that the manufacturing PMIs outside of China will probably weaken in March.

Chart 1: EM & China Caixin Manufacturing PMI

Chart 2: Selected EM Manufacturing PMIs


Chart 3: Contribution of Suppliers’ Delivery Times Index to Headline Manufacturing PMI (Feb. 2020)

Chart 4: Total Coronavirus Cases
Confirmed outside China


Sources: Refinitiv, Markit, CEIC, Johns Hopkins CSSE, Capital Economics

Nikhil Sanghani, Assistant Economist, +44 20 7808 4998,