Increased Consumer Demand For Durable Goods Fires Up Factories
Accelerating demand for durable goods like cars and appliances is kicking up manufacturing at Asian and European factories despite rising cases of COVID-19, according to a Wall Street Journal (WSJ) report on Monday (Nov. 2).
Purchasing managers for manufacturers point to a growing gap between the consumer demand for products over in-person services, the WSJ said, citing recent surveys.
Most countries have been slowly bouncing back from the big declines at the start of the pandemic, coming back strong in the three months through September. New restrictions due to a spike in the infection rate are expected to slow the economic rebound through the end of the year.
India is leading the increase in manufacturing, posting its biggest hike in activity in a single month for more than 10 years. Factories in Thailand and South Korea have also reported a spike in activity for the first month this year. Germany is leading the rebound in Eurozone factories.
In France, its statistics agency INSEE indicated that household expenditures of manufactured goods jumped 4.2% over the previous year. Consumption of services dropped 5% in the same time period.
“There seems to have been a good deal of expenditure switching away from consumption of certain services towards goods,” wrote Erik F. Nielsen, chief economist at UniCredit Bank, in a note to clients, per the WSJ.
IHS Markit told the news outlet that manufacturers of business equipment and machinery picked up more than consumer goods.
“The renewed weakness of consumer-facing businesses serves as a reminder that, while manufacturing as a whole may be booming for now, the sustainability of the recovery will depend on household behavior returning to normal and labor markets strengthening,” Chris Williamson, IHS Markit’s chief business economist, told the WSJ.
The U.S. economy showed a rebound in durable goods that topped September forecasts, up 1.9 percent. Forecasts were expecting just a 0.5 percent rise. Overall, orders for manufactured durable goods rose by $4.3 billion in September, to $237.1 billion.
Many manufacturing firms that offshored years ago are now returning to the U.S., Tony Uphoff, president and chief executive officer of Thomas, told PYMNTS. Thomas is a supplier discovery and product sourcing platform.