U.S. Manufacturing Is Already Ailing from Coronavirus

Supplies are hard to come by, and in the longer-term demand may be at risk.

The picture for manufacturing is grim. New orders and production are flat, employment is down and inventories are falling because of delayed shipments of raw materials and components from sourced in Asia. Those woes are particularly acute for the electronics industry, but are also a problem in food, chemicals and fabricated metals. Expect disruptions to worsen this spring.

Supply chain breakdowns go beyond China. Businesses that source parts or materials from Southeast Asia are finding out that many of those suppliers depend on China for raw materials. One-third of Cambodia’s garment factories have shut down for lack of Chinese fabrics. Myanmar, Bangladesh, Thailand, Pakistan and other countries are experiencing similar China-related shortages. China’s factories should be humming again by the end of this month, but it’ll take longer than that to make up for lost production and restock inventories.

Meanwhile, certain consumer goods are getting scarce. Sporting goods, kitchen wares and other household goods in the $20 range sold on Amazon are especially affected. Some vendors that source from China are paying two or three times the normal price. Expect most businesses to hold off on big investments or M&A activity until the worst of the public health threat has passed and the logistical snafus ease.

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David Payne
Staff Economist, The Kiplinger Letter

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.