Economic Recovery of ManufacturingPublished on: May 22, 2020
Categorized in: News
In the wake of the Covid-19 pandemic, the economic activity of the United States has plummeted, leading to a high level of unemployment. The decline of the manufacturing sector has been compared to the Great Depression. Many are looking towards a V, U, L, or a W shaped graph of what the GDP will look like on the road to recovery. What we are witnessing is one of the largest economic shocks of the 21st century. This is obviously far from being a normal shock, it’s the largest and sharpest fall of GDP. Interestingly, no sector of the economy is immune to the current happenings. Although, some are more affected than the others, one of the those at the bottom of the trajectory is the manufacturing sector whose road to recovery is quite unpredictable.
Saving both lives and the economy does not always go hand in hand, that’s why the manufacturing sector may take a while before it recovers. Manufacturers are without any choice but to bear the brunt, which may take years before it passes. We are looking at a 20-3-% decline in GDP in the 2nd Quarter of 2020 with a 15% increase in unemployment. Even though the mortalities and confirmed cases of Covid-19 is far from what was recorded during the Spanish Flu of 1918, the economic consequences will also be greater. That’s why manufacturers believe it will be a long road to recovery.
While many have looked to the lessons of the Spanish Flu of 1918 for experience on how to weather the storm, the conditions and the realities are different. The mortality rate, the speed of infection and the medium of infection are different. More importantly, the United States is at the receiving end of the Covid-19 pandemic with over 30% of global cased recorded. More so, it will definitely take a while for normalcy to return, it may take as far as 2022. This means that in order to protect their employees, manufacturers might have to wait until either a vaccine is found, or the curve is totally flattened. Either ways, the road to the end is far from where we are currently.
No Choice But To Resume Production
Between June and July, manufacturers will have no choice but to resume production. This is in addition to those who never stopped production but only diverted their resources to producing essentials needed to tackle the pandemic. In order to make this work, there will be need to enforce the best of safety practices that will guarantee the health of the manufacturing workers. More importantly, the need to put in place the best of safety procedures such as the use of PPE and several other measures that will ensure employees are not put at risk.
Regardless, resuming production is not the only issue manufacturers have to deal with, getting back production to what it was before the Stay in Place orders is the real worry. More importantly, what will happen to production in the event of another wave of infection as this is likely to happen. The speed of getting production levels back up is far beyond what manufacturers can control or predict, it’s a matter of response to the pandemic by the government at all levels.
We are talking about a sector that has been bedeviled by a wide range of issues in the past. Regardless of what is done, the road to recovery of the manufacturing sector will be slow. A scenario that will lead to manufacturers scampering for safety by shifting manufacturing to places that are responding excellently to the pandemic.