SIMIC

 Factories around the world continued to report low levels of output and fresh layoffs as governments moved gingerly to lift restrictions imposed to limit the spread of the novel coronavirus, but the figures offer some hope that manufacturing is at the start of a slow path to recovery.

Surveys of purchasing managers at manufacturers in Asia and Europe indicated that in most countries, the decline in activity slowed from the record fall seen in April. Only in China did factories report an increase in activity, but the surveys suggested that its nascent economic recovery is already beginning to stall.

The U.S. Institute for Supply Management’s manufacturing index for May, due at 10 a.m., is expected to rise to 44.0 from 41.5 the prior month.

The surveys indicate that the worst might be over for manufacturers, and activity could start to increase in coming months. But the road back to the levels of output and employment seen at the end of last year is set to be long and bumpy.

“Whether growth can achieve any serious momentum remains highly uncertain, however, as demand looks set to remain subdued by social distancing measures, high unemployment and falling corporate profits for some time to come,” said Chris Williamson, chief business economist at IHS Markit, the data firm that compiles most of the surveys.

In many countries, factory managers reported that restrictions on movement continue to make it difficult for them to operate at normal levels of output. But they also reported that weak demand is holding them back, with new orders continuing to fall.

In a sign that factories don’t expect conditions to improve rapidly, many reported further job cuts. In India and South Korea, those reductions in payrolls were the largest on record.

One problem highlighted by the surveys is that even where local restrictions have been removed, or were never very severe to begin with, the return to normality is being impeded by weak export demand.

China — the first country exposed to the virus — entered lockdown earlier than other countries. It also exited its lockdown earlier, but May surveys of purchasing managers pointed to a large decline in export orders.

That was also true of South Korea, which chose not to impose mandatory lockdowns and focused instead on widespread testing and tracing of those infected by the virus, and the people with whom they had come into contact.

Separate figures released Monday showed South Korea’s May exports were down 23.7% from a year earlier to $34.86 billion following the prior month’s revised 25.1% contraction.

“Crucially, the country’s main export markets are exiting lockdown a lot slower than their entry into it,” said Miguel Chanco, an economist at Pantheon Macroeconomics.

China’s Caixan Purchasing Managers Index rose to 50.7 from 49.4, a sign that manufacturing activity increased after having fallen in April. A reading above 50.0 indicates an increase in activity, while a reading below that level indicates a decrease.

However, other manufacturing powerhouses continued to experience deep declines. Germany’s PMI rose only slightly, to 36.6 from 34.5, while Japan’s PMI fell to 38.4 from 41.9.

Across the eurozone, Italy moved closest to a manufacturing recovery, as its PMI rose to 45.4 from 31.1.

According to the CPB Netherlands Bureau for Economic Policy Analysis, global industrial production was 4.2% lower in the first three months of the year than in the final quarter of 2019. The surveys of purchasing managers suggest the decline in the three months through June might be even larger.