COVID-19 May Be Delivering A Local Manufacturing Renaissance

The tragic pandemic that has caused more than 4,600 deaths worldwide may have one silver lining. Beyond the human suffering and the economic damage from canceled events and flights, local production in the US is surging.

Some, such as Vladimir Signorelli, head of macro investment research outfit Bretton Woods Research, suggested at the height of the Chinese outbreak that “using China as a hub…that model died this week.”

That seems to be backed by newly released data from Machine Metrics. The Industrial IoT Platform for manufacturing devices has seen an unseasonal uptick in utilization across the fleet it monitors over the past weeks. In fact, at 30.5%, utilization is at the highest levels since October 2018.

Several reasons could be driving this growth while the rest of the world is grinding to a halt: Of course, manufacturers could be reacting to panic buying. They could also be building up inventory to prepare for a deepening crisis. Finally, they may also be working around supply chain shortages caused by the decline of Chinese output in February.

Some, such as Mr. Signorelli, expect the temporary fix to become a permanent feature. That remains to be seen, especially as manufacturing is typically a lagging indicator. The newly identified growth may simply be a relic of the pre-COVID days. Manufacturing outside MachineMetrics’s client base barely grew in February – at only 0.1% above the base, the ISM Manufacturing Index fell to a virtual standstill. With worst-case scenarios in the UK now estimating that up to 20% of the labor force could be off sick, it’s hard to imagine that factories could still be staffed.

Even Bill Bither, CEO of MachineMetrics, admits it’s too early to draw conclusions: “I do think that this pandemic will cause more manufacturers to domesticate their supply chain – but I have a hard time believing that they could move so fast responding to this virus that they are ramping up production already.”