In North America, the COVID social distancing met the shutdown of manufacturing plants and we look to Europe what can be the trends in the US. In an article by Jonathan Cable and Leika Kihara of Reuters examined manufacturing in Europe and Asia.
All countries have been shutdown by the COVID 19 virus and the manufacturing bell weather index the IHS Markit Manufacturing Purchasing Managers Index (PMI) was at its lowest in April but has since risen to 39.4 from 33.4. The normal number is somewhere in the 50 mark.
The good news is manufacturing has picked up in relationship to health care and personal protection equipment.
The bad news in relationship to recovery in China is the US is having unease with China’s relationship to Hong Kong and how China communicate its work on COVID. The recovery in the world’s second largest economy is intact but fragile.
Japan’s factory activity shrank at the fastest pace since May, in addition South Korean economy slumped. Taiwan’s manufacturing fell in May, while Vietnam, Malaysia and the Philippines saw PMIs rebound although all below the normal 50 mark threshold.
Linking to dividend paying stocks, when the government opens up the economy we all hope that normal activity resumes but Europe and Asia activity show manufacturing will not rebound quickly. We may hope for a V shaped economy, the reality will be different. As you examine your holdings, think about cash flow and how the company makes profit.
There are more questions than answers, till the next time – to raising questions.