World Economics

The March Sales Managers Survey Shows China’s Economy Still in Negative Territory, But...

• Recovery from the precipitous fall in activity in February is under way
• Business Confidence is marginally up on a month ago
• However many markets are still reeling from the problems caused by the Coronavirus
• Prices for some raw materials in short supply are sky high
• Many delivery times remain far longer than was previously the case

In general panel members believe that the dramatic restrictions imposed on personal and business activity are succeeding in containing the spread of the Coronavirus in China. In regions outside Wuhan many businesses have re-opened once local restrictions have been lifted.

Transportation problems are diminishing although the many inspections and delays on the roads mean goods are still taking significantly longer to arrive. And for some items in short supply prices have moved very sharply upwards.

Consumer behaviour has been significantly modified in many areas, and it isn’t apparent that these changes will revert to normal quickly. Restaurants are doing far more takeout activity than previously with many diners still reluctant to eat in company. Supermarkets have reopened in many places, but are still scarcely populated with consumers preferring to buy via delivery services. Buying of long lasting canned goods and other consumables is still prevalent as feelings persist the virus may come back as soon as consumers revert to previous behaviour patterns. Many people still stay at home when they have the choice not to go to work in an office or factory. The businesses most heavily impacted by the virus, notably all the hospitality trades, are still largely deeply mired in falling markets. But overall business conditions are gradually improving.

In summary World Economics believes Q1 GDP will record a significant decline in economic activity in China. The slow recovery underway will not be sufficiently rapid to offset the major declines in both manufacturing and services areas seen in recent weeks.

What Q2 will look like is currently impossible to forecast, but those of a betting disposition should gamble on a slow recovery