Q2 2020 · 2020-04-29 · Q2 2020 Retail Sourcing Report. Purchasing Manager’s Index (PMI) To help understand industry and economic conditions in a country, the PMI Index tracks

Retail Sourcing Report Facts & Insights

Q2 2020

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RETAIL SOURCING REPORT

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RETAIL SOURCING REPORT

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PURCHASING MANAGER’S INDEX (PMI)

LOW COST COUNTRY SOURCING (LCCS) HIGHLIGHTS

GLOBAL COMPETITIVENESS INDEX

CHINA WAGE TREND SNAPSHOT

GLOBAL LOW-COST COUNTRY SOURCING WAGE

SNAPSHOT

CONTAINER FREIGHT RATES FOR MAJOR ROUTES

CURRENCY EXCHANGE RATES

GLOBAL COMMODITY RATES

CRUDE OIL

RUBBER

METALS

COTTON

WOOL PLASTICS AND SYNTHETIC FIBERS

FOCUS TOPIC: THE IMPACT OF THE CORONAVIRUS

IMPACT ON THE GLOBAL ECONOMY

IMPACT ON CHINA

IMPACT ON DEVELOPING COUNTRIES

IMPACT ON SUPPLY CHAINS

ABOUT CBX SOFTWARE

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Q2 2020 Retail Sourcing Report

Purchasing Manager’s Index (PMI)

To help understand industry and economic conditions in a country, the PMI Index tracks variables such as output, new orders, stock levels, employment and prices across private companies in the manufacturing, construction, retail and service sectors. Over 30 countries and regions participate in various PMI surveys.

A reading below 50 indicates contraction from the previous month, while a reading above 50 indicates growth. This update looks at a selection of emerging economies and key sourcing countries, providing indicators for recent months based on data provided by IHS Markit, NIKKEI, CAIXIN and other sources.

Sources: IHS Markit Economics, Nikkei, Caixin

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Purchasing Manager’s Index (PMI) To help understand industry and economic conditions in a country, the PMI Index tracks variables such as output, new orders, stock levels, employment and prices across private companies in the manufacturing, construction, retail and service sectors. Over 30 countries and regions participate in various PMI surveys. A reading below 50 indicates contraction from the previous month, while a reading above 50 indicates growth. This update looks at a selection of emerging economies and key sourcing countries, providing indicators for recent months based on data provided by IHS Markit, NIKKEI, CAIXIN and other sources. Q2 2020 News & Analysis: PMI indices showed a massive fall in global production activity since the coronavirus outbreak, with Q2 especially affected as production slowed in China and demand in many verticals waned across the rest of the globe. Even as production in China began to pick up in March, lockdowns in many countries through April dampened demand. China and India were some of the only countries to avoid contraction as China rebounded and India only starting to feel the impact. Weak consumer demand should continue to depress manufacturing and purchasing through Q2 and possibly the rest of 2020.

Country Jan 2020

Feb 2020

Mar 2020 Summary of Indicators

Brazil 51.0 52.3 48.4 Following the broader global trend, Brazil’s manufacturing sector saw a sharp fall in production in March, with lower demand, fewer orders and declines in employment.

China 51.1 40.3 50.1 China saw a rebound in March after production fell to a survey low in February due to the pandemic. 2020 will be hard on China though as global demand plummets.

Columbia 53.4 52.5 49.3 Columbian manufacturing saw a sharp drop in new orders in March, limiting input buying, leading to production cuts, hiring weakness and a subdued outlook for 2020.

Czech Republic 45.2 46.5 41.3 With factory closures and plummeting demand, the Czech manufacturing economy

was hard hit in March, leading to workforce reductions and a dismal outlook for 2020.

India 55.3 54.5 51.8 India’s manufacturing sector deteriorated to a 4-month low, with supply shortages and weaker foreign demand, but India still felt only a marginal impact from the virus so far.

Indonesia 49.3 51.9 45.3 Manufacturing in Indonesia was hit hard in March by the pandemic slowdown, with declines in purchasing and job cuts as new orders, output and demand fell into Q1.

Malaysia 48.8 48.5 48.4 Malaysia suffered less than other manufacturing economies as domestic and foreign demand fell and supply of inputs tightened, a trend which should extend in Q2/Q3/.

Mexico 49.0 50.3 46.9 Mexico felt a strong impact from the coronavirus in March, with waning demand, a decline in output and new orders, staff cuts and a soft outlook for the rest of 2020.

Myanmar 52.7 49.8 45.3 Myanmar’s manufacturing suffered their worst month on record on a slide in new orders and limited supply of inputs. This trend is expected to continue through 2020.

Poland 47.4 48.2 42.4 Poland saw the strongest downturn in its manufacturing economy since the 2008 global financial crisis, as new orders, output and employment continued to fall into Q2.

Russia 47.9 48.2 47.5 Russian manufacturing saw a marginal decline in production in March, with an overall contraction in Q1 as foreign/ domestic demand fell, with a subdued outlook for Q2/Q3.

South Africa 48.3 48.4 44.5 South Africa faced the sharpest drop in new orders in the survey’s history in March.

Pressures on supply chains pushed input costs higher as consumer demand fell.

South Korea 50.1 48.7 44.2 South Korea had its worst manufacturing month since 2009 as supply chains shut

down due to Covid-19, signaling pessimism for South Korean exports through 2020.

Turkey 51.3 52.4 48.1 Despite an increase in orders early in Q1, output in Turkey fell sharply in March as the pandemic shut down production and demand, a trend likely to continue through 2020.

Vietnam 50.6 49.0 41.9 Vietnam’s manufacturing suffered heavily in March with sharp reductions in purchasing, job cuts and a reduction in new orders and output extending through Q2.

Sources: IHS Markit Economics, Nikkei, Caixin


Q2 2020 News and Analysis:

PMI indices showed a massive fall in global production activity since the coronavirus outbreak, with Q2 especially affected as production slowed in China and demand in many verticals waned across the rest of the globe. Even as production in China began to pick up in March, lockdowns in many countries through April dampened demand. China and India were some of the only countries to avoid contraction as China rebounded and India only starting to feel the impact. Weak consumer demand should continue to depress manufacturing and purchasing through Q2 and possibly the rest of 2020.

Low Cost Country Sourcing (LCCS) HighlightsThis section looks at selected issues impacting sourcing from key LCCS destinations based on data available at the time of printing the report, alongside official import/export numbers highlighting global sourcing trends. With the world under lock-down, low cost-sourcing countries struggled to manage the impact of Covid-19; the broad reality is shut down factories, workers on stand-by, limited raw materials and plummeting demand.

Bangladesh –With relatively few coronavirus cases, but spreading quickly, orders fell off and Bangladesh locked down the country in early April, halting apparel exports and putting millions of workers on standby.

Cambodia – Cambodia’s apparel exports plummeted in the country’s key industry employing over 800,000 workers. Over half of Cambodia’s 500 garment factories are expected to halt production by the end of April.

India – India extended its coronavirus lockdown to May 3 to limit the spread of the virus. While India’s economy has seen minimal impact so far, the World Bank revised its 2020 growth forecast to 1.5-2.8%

Indonesia – Indonesia is expected to reach a peak in their coronavirus cases in May which will extend the economic impact through 2020. For a country which runs a large current account deficit, this is a major crisis.

Pakistan –Officially in lockdown, on April 14, Pakistan announced a plan for gradual reopening of certain industries. Pakistan initially picked up export orders during the China shutdown, but then faced its own crisis.

Philippines – The Philippines acted early to quarantine over half their population of 107 mln, however the counter effect is that the Philippines is expected to post zero GDP growth in 2020 in a best-case scenario.

Thailand – Thailand’s heavy reliance on tourism and exports led to lower GDP growth forecast of 1.5-2.5% for 2020. The Thai government announced stimulus measures in late Q1 valued at over US$ 58 billion. Turkey – Turkey saw dramatic numbers of new coronavirus cases in April, at more than 4,000 per day. The government implemented a partial lockdown along with stimulus measures to soften the economic impact. Vietnam - Vietnam had some early success in fighting the pandemic but the spread of the virus led to business shutdowns and slower export demand, with the government lowering GDP growth forecasts to 6%.


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Low Cost Country Sourcing (LCCS) Highlights This section looks at selected issues impacting sourcing from key LCCS destinations based on data available at the time of printing the report, alongside official import/export numbers highlighting global sourcing trends. With the world under lock-down, low cost-sourcing countries struggled to manage the impact of Covid-19; the broad reality is shut down factories, workers on stand-by, limited raw materials and plummeting demand. Bangladesh –With relatively few coronavirus cases, but spreading quickly, orders fell off and Bangladesh locked down the country in early April, halting apparel exports and putting millions of workers on standby. Cambodia – Cambodia’s apparel exports plummeted in the country’s key industry employing over 800,000 workers. Over half of Cambodia’s 500 garment factories are expected to halt production by the end of April. India – India extended its coronavirus lockdown to May 3 to limit the spread of the virus. While India’s economy has seen minimal impact so far, the World Bank revised its 2020 growth forecast to 1.5-2.8% Indonesia – Indonesia is expected to reach a peak in their coronavirus cases in May which will extend the economic impact through 2020. For a country which runs a large current account deficit, this is a major crisis. Pakistan –Officially in lockdown, on April 14, Pakistan announced a plan for gradual reopening of certain industries. Pakistan initially picked up export orders during the China shutdown, but then faced its own crisis. Philippines – The Philippines acted early to quarantine over half their population of 107 mln, however the counter effect is that the Philippines is expected to post zero GDP growth in 2020 in a best-case scenario. Thailand – Thailand’s heavy reliance on tourism and exports led to lower GDP growth forecast of 1.5-2.5% for 2020. The Thai government announced stimulus measures in late Q1 valued at over US$ 58 billion. Turkey – Turkey saw dramatic numbers of new coronavirus cases in April, at more than 4,000 per day. The government implemented a partial lockdown along with stimulus measures to soften the economic impact. Vietnam - Vietnam had some early success in fighting the pandemic but the spread of the virus led to business shutdowns and slower export demand, with the government lowering GDP growth forecasts to 6%.

Exports (% yoy growth)

Jun 2019

Jul 2019

Aug 2019

Sep 2019

Oct 2019

Nov 2019

Dec 2019

Jan 2020

Feb 2020

Bangladesh -5.3 8.6 -11.5 -7.3 -17.2 -10.7 2.9 -1.7 -1.8 Cambodia 4.3 23.2 17.9 -3.4 - - - - - India -8.0 2.2 -6.1 -6.6 -1.1 -0.3 -1.8 -1.7 2.9 Indonesia -8.9 -5.1 -10.0 -5.7 -6.1 -6.1 1.1 -3.7 - Pakistan -8.8 15.7 -7.7 2.7 6.8 9.4 -3.9 -2.8 13.8 Philippines 3.3 3.5 0.8 -1.2 0.3 -0.4 21.4 - - Thailand -2.1 4.3 -4.0 -1.4 -4.5 -7.4 -1.3 3.3 - Turkey -14.4 7.8 1.6 0.2 -1.1 -0.8 5.2 6.4 - Vietnam 7.1 7.8 8.1 8.4 8.3 7.9 8.4 -17.4 - Imports (% yoy growth)

Jun 2019

Jul 2019

Aug 2019

Sep 2019

Oct 2019

Nov 2019

Dec 2019

Jan 2020

Feb 2020

Bangladesh 2.4 -0.7 -2.0 -11.2 -1.1 -10.6 3.1 - - Cambodia 23.4 33.1 17.2 9.0 - - - - - India -10.0 -10.4 -13.5 -13.9 -16.3 -12.7 -8.8 -0.8 2.5 Indonesia 2.0 -15.2 -15.7 -2.4 -16.5 -9.2 -5.6 -4.8 - Pakistan -22.8 -16.4 -26.3 -13.9 -15.2 -14.0 -8.3 -7.4 -1.7 Philippines -10.4 -4.2 -8.8 -10.5 -10.8 -8.0 -7.6 - - Thailand -9.4 1.7 -14.6 -4.2 -7.6 -13.8 2.5 -7.9 - Turkey -22.7 -8.5 1.5 0.1 10.8 11.9 19.8 18.8 - Vietnam 8.7 8.6 8.0 8.4 7.7 6.6 6.8 -13.7 -

Sources: News Reports, Various Statistical Bureaus Sources: News Reports, Various Statistical Bureaus

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Global Competitiveness Index

The Global Competitiveness Index is a ranking of countries based on their competitiveness across different measures such as government regulations, labor market efficiency, education, infrastructure and other measures important to doing business in a country. Below is a selection of emerging economies which are important low cost and strategic sourcing locations. Most of these countries are increasing their competitiveness on key economic measures every year, with China leading overall.

Note: The below data is released annually by the World Economic Forum (WEF). For this report we have selected relevant countries and updated the chart as of current data released in August 2019.

Global Competitiveness Index: Selected Indicators, 2018-2019 (Ranking of 140 countries)


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Global Competitiveness Index The Global Competitiveness Index is a ranking of countries based on their competitiveness across different measures such as government regulations, labor market efficiency, education, infrastructure and other measures important to doing business in a country. Below is a selection of emerging economies which are important low cost and strategic sourcing locations. Most of these countries are increasing their competitiveness on key economic measures every year, with China leading overall. Note: The below data is released annually by the World Economic Forum (WEF). For this report we have selected relevant countries and updated the chart as of current data released in August 2019. Global Competitiveness Index: Selected Indicators, 2018-2019 (Ranking of 140 countries)

Rank/141 Bangladesh Cambodia China India Indonesia Pakistan Philippines Thailand Turkey Vietnam Overall competitiveness 105(↓2) 106(↑4) 28(-) 68(↓10) 50(↓5) 110(↓3) 64(↓8) 40(↓2) 61(-) 67(↑10)

Institutions 109(↓1) 123 (↑3) 58(↑7) 59(↓12) 51(↓3) 107(↑2) 87(↑14) 67(↓7) 71(-) 89(↑5) Intellectual property protection

125(↓6) 112(↑11) 53(↓4) 57(↓12) 51(↓7) 78(↑5) 55(↓3) 99(-) 87(↑7) 105(-)

Burden of government regulation

84(↓15) 66(↓5) 19(↓1) 26(↓10) 29(↓3) 46(-) 103(↓12) 50(↑8) 60(↑14) 79(↑17)

Infrastructure 114(↓5) 106(↑6) 36(↓7) 70(↓7) 72(↓1) 105(↓12) 96(↓4) 71(↓11) 49(↑1) 77(↓2)

Quality of roads 108(↑3) 97(↑3) 45(↓3) 48(↑3) 60(↑15) 67(↑2) 88(-) 55(-) 31(↑2) 103(↑6)

Quality of railroad 40(-) 78(-) 61(↓3) 39(↓1) 85(↓3) 54(↓2) 91(↓4) 55(↓1) 52(↓1) 58(↓1)

Quality of port 92(↑1) 91(↓5) 52(↓4) 49(↓9) 61(-) 70(↓1) 88(↓4) 73(↓5) 44(↑6) 83(↓5) Quality of air transport 109(-) 113(↑1) 66(↓3) 59(↓6) 56(↓7) 93(↓4) 96(↓4) 48(-) 31(↑4) 103(↓2)

Macroeconomic environment 95(↓7) 75(↓1) 39(-) 43(↑6) 54(↓3) 116(↓13) 55(↓12) 43(↑5) 129(↓13) 64(-)

Health & primary education

93(↑3) 105(↓1) 40(↑4) 110(↓2) 96(↓1) 115(↓6) 102(↓1) 38(↑4) 42(↑6) 71(↓3)

Higher education & training

117(↓1) 120(↑1) 64(↓1) 107(↓11) 65(↓3) 125(-) 67(-) 73(↓7) 78(↓1) 93(↑4)

Goods market efficiency 119(↑4) 113(↑1) 54(↑1) 101(↑9) 49(↑2) 126(↓4) 52(↑8) 84(↑8) 78(↓2) 79(↑23)

Prevalence of trade barriers 75(↓39) 73(↑11) 60(↓3) 66(↓13) 80(↓7) 115(↓5) 51(↓9) 71(↓10) 79(↓17) 121(↑3)

Trade tariffs, %duty 130(↓2) 100(↓2) 123(↑1) 134(↓1) 73(↑4) 139(↓1) 52(↑3) 92(-) 75(↓3) 96(↓3)

Labor market efficiency 121(↓6) 65(-) 72(↓3) 103(↓28) 85(↓3) 120(↑1) 39(↓3) 46(↓2) 109(↑2) 83(↑7)

Cooperation in labor-employer relations

99(↓12) 80(↓20) 55(↓3) 65(↓20) 67(↓17) 103(↑5) 15(↑9) 37(↓2) 118(↓5) 82(↑10)

Flexibility of wage determination

89(↓8) 114(↓5) 100(↓2) 88(↑7) 81(↓10) 122(↑1) 51(↓6) 116(↓5) 46(↓11) 74(↑15)

Pay and productivity 80(↓2) 55(-) 27(-) 64(↓41) 28(↓10) 63(↓2) 13(↓3) 30(↑6) 96(↓1) 56(↑10)

State of cluster development 84(↓21) 64(↓19) 26(↑3) 38(↓12) 27(↑1) 57(↓3) 63(↓14) 47(↑8) 67(↑13) 44(↑33)

Source: World Economic Forum (WEF)

Sources: World Economic Forum (WEF)

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China Wage Trend Snapshot


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China Wage Trend Snapshot Q2 2020 News & Analysis: The biggest news on the China wage front is the impact of the coronavirus. While provinces continue to implement wage hikes, analysts predict job losses in the range of 30 million in 2020 due to factory closures and reduced demand both domestically and for China’s exports, which will further impact worker wages. Many Chinese workers have no contracts and don’t pay unemployment insurance scheme, leaving them to rely on employer generosity or family support. According to the Economist Intelligence Unit, In Q1 around 5 million people lost their jobs, but only 2.3 million received unemployment benefits. Numerous cases have also been reported of workers not being paid, both those on “furlough” and active employees. China’s migrant labor force of 200 million have also been heavily impacted, losing over $100 billion in wages. Note: These are official wage guidelines mandated by each province or region based on information publicly available as of April 1, 2020. As such these numbers serve as an indicator. Actual wages may include benefits, food, housing etc. Minimum wage is typically 40-60% of average total wage.

2019 Minimum Wage Updates (official)

City/Region/Province Monthly Min Avg Wage (RMB) Increase % Official Update

Anhui 1,550 20.6% Nov 1, 2019 Beijing 2,200 3.8% Jul 1, 2019 Fujian 1,800 7.4% Jan 1, 2020 Chongqing 1,800 20.0% Jan 1, 2019 Gansu 1,620 10.2% Jun 1, 2017 Guangxi 1,680 16.7% Feb 1, 2018 Guangdong 2,100 12.3% Jul 1, 2018 Guizhou 1,790 6.6% Dec 1, 2019 Hainan 1,670 12.6% Feb 1, 2016 Heilongjiang 1,680 15.4% Oct 1, 2017 Henan 1,900 8.2% Oct 1, 2018 Hebei 1,900 14.8% Nov 1, 2019 Hubei 1,750 13.1% Nov 1, 2017 Hunan 1,700 13.6% Oct 1, 2019 Inner Mongolia 1,760 8.0% Aug 1, 2017 Jiangsu 2,020 8.1% Aug 1, 2018 Jiangxi 1,680 15.1% Jan 1, 2018 Jilin 1,780 22.5% Oct 1, 2017 Liaoning 1,810 7.6% Nov 1, 2019 Ningxia 1,660 12.4% Oct 1, 2017 Qinghai 1,700 15.3% May 1, 2017 Shaanxi 1,800 7.0% May 1, 2019 Shandong 1,910 6.7% Jun 1, 2018 Shanghai 2,480 2.5% Apr 1, 2019 Shenzhen 2,200 4.9% Jul 1, 2018 Sichuan 1,780 7.1% Jul 1, 2018 Tianjin 2,050 5.1% Jul 1, 2017 Tibet 1,650 17.8% Jan 1, 2015 Xinjiang Uyghur 1,820 12.9% Jan 1, 2018 Yunnan 1,670 10.6% May 1, 2018 Zhejiang 2,010 8.4% Dec 1, 2017

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Q2 2020 News & Analysis:

The biggest news on the China wage front is the impact of the coronavirus. While provinces continue to implement wage hikes, analysts predict job losses in the range of 30 million in 2020 due to factory closures and reduced demand both domestically and for China’s exports, which will further impact worker wages.

Many Chinese workers have no contracts and don’t pay unemployment insurance scheme, leaving them to rely on employer generosity or family support. According to the Economist Intelligence Unit, In Q1 around 5 million people lost their jobs, but only 2.3 million received unemployment benefits. Numerous cases have also been reported of workers not being paid, both those on “furlough” and active employees. China’s migrant labor force of 200 million have also been heavily impacted, losing over $100 billion in wages.

Note: These are official wage guidelines mandated by each province or region based on information publicly available as of April 1, 2020. As such these numbers serve as an indicator. Actual wages may include benefits, food, housing etc. Minimum wage is typically 40-60% of average total wage.

Global Competitiveness Index

Below is a snapshot of minimum wages in selected Asian sourcing locations, with the addition of Egypt, Ethiopia and Turkey to give a comparative view. Wages vary by region or province and indicate either an estimated or actual/official rate. In cases with a distinct variance, we provide an average. Currency fluctuations mean that these figures are approximate at the time of finalizing this report.

Global Competitiveness Index: Selected Indicators, 2018-2019 (Ranking of 140 countries)

Sources: WageIndicator.org, SAFSA, Local News Reports

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Global Low-Cost Country Sourcing Wage Snapshot Below is a snapshot of minimum wages in selected Asian sourcing locations, with the addition of Egypt, Ethiopia and Turkey to give a comparative view. Wages vary by region or province and indicate either an estimated or actual/official rate. In cases with a distinct variance, we provide an average. Currency fluctuations mean that these figures are approximate at the time of finalizing this report. Q2 2020 News & Analysis: Low wage factory workers across major sourcing countries were heavily impacted by the pandemic shutdowns. Whereas before the crisis, workers were struggling to earn a living wage, now many are sidelined as factories are shut down, raw materials limted, orders have dried up and global demand for the remainder of 2019 is uncertain. While China is mostly back to business with limited orders to fulfill, more than half of the factories in Bangladesh, Cambodia, Vietnam, Turkey, Myanmar, Indonesia and other countries are still shut down as of mid-April. Note: Figures are provided in USD/month based on currency exchange as of April 1, 2020. Minimum wage policies are updated as per data available at the time of finalizing this report and are based primarily on unskilled wages. Consult sources such as Fair Wage Guide or Wageindicator.org to assess and calculate benchmarks for wages in particular countries and regions not covered here.

BANGLADESH CAMBODIA CHINA EGYPT ETHIOPIA $95 (Jan 2019) $190 (Jan 1, 2020) $163-$359 (Jan 2020) $116 (April 2019) $26 (Jan 2015) Bangladesh announced a wage increase to BT8000 (US&95) a 51% increase from the previous minimum wage which had been in place since 2013. Unions were calling for a BT16000 minimum wage.

Cambodia announced and increase to their minimum from US$182, to $190 a 4.4% increase, which will take effect from January 1, 2020. Political and labour tension continues as opposition push for more rights and pay.

Minimum wages in China are set by local governments and vary widely by region wages formulas (with housing, food, overtime etc.) Actual 2020 wages for manufacturing jobs in China are much higher at US$870/month

Egypt raised the country’s minimum age to 2000 Egyptian pounds ($116) from 1200 pounds, applying to all workers, with higher increases going to private sector workers. This increase came ahead of a June 30 target date.

Ethiopia is working on a system to determine a min. wage for the private sector (wage guidelines exist for govt. workers). Entry level wages in the textile sector range from $35 -$40. The base min wage is officially $18.

INDIA INDONESIA LAO PDR MALAYSIA MYANMAR $94-$236 (Oct 2019) $120-$298 (Jan 2019) $124 (May 2018) $270-$295 (Jan 2019) $80 (Mar 2018)

Indian min. wages vary by region and skill level. The Indian labor ministry announced a mandatory 178 Rupee/day wage and made changes to cover wages for “gig” economy workers

In October 2018, Indonesia’s manpower minister proposed an 8.13% minimum wage increase for 2019 and urged the provinces to accept. Indonesia wages vary by their 34 provinces and regions.

The Lao Government approved an increase in minimum wage from Kip 900,000 (US$107) to Kip 1,100,000 (US$142)) in key provinces for 2018. This raise took effect in May 2018.

Malaysia implemented a nationwide minimum wage of RM 1,100 as of January 2019. Wages vary by region and are supposed to be reviewed every 2 years. The new directive is being enforced widely.

Myanmar revised its minimum wage from K600 ($2.70) per day to K4,800 (3.60) or K600/ hour for an eight-hour workday. This is an increase of 33%, mostly impacting garment workers.

PHILLIPPINES SRI LANKA THAILAND TURKEY VIETNAM $132-$190 (Jan 18) $67 (Mar 2016) $248-$265 (Apr 1/18) $482 (Jan 2020) $132-190 (Jan 1/19) Wages in the Philippines vary by region, skill level and wage classification. Negotiations are still underway, but Manila for example saw a 21 Peso ($0.42) increase in their daily wage to 491 Pesos ($9.82) in Q4 2017.

Sri Lanka adopted two laws on minimum wages as of early 2016, mandating a minimum wage of Rs 10,000 (+/- $67) and an increase of Rs 2,500 (+/-f$17) for workers earning less than Rs 40,000 per month (+/- $270)

Thailand is in the process of updating their minimum wage from a current minimum of 308 – 330 Baht per day to a proposed 400 Baht per day. Most businesses are opposed to this higher wage as being too high.

To combat inflation of close to 12%, Turkey announced a minimum wage increase of 15%, effective Jan 1, 2020 to 2,324 liras/month (US$381) net. This brings the gross minimum wage (before deductions) to 2,943 liras/month (US$482).

Vietnam announced they will increase their minimum wage by 5.3% in 2019. This increase was relatively lower than the 2018 increase of 6.5%. Wages range from $125-$180 / month across 4 key regions in Vietnam.

Sources: WageIndicator.org, SAFSA, Local News Reports


Q2 2020 News & Analysis:

Low wage factory workers across major sourcing countries were heavily impacted by the pandemic shutdowns. Whereas before the crisis, workers were struggling to earn a living wage, now many are sidelined as factories are shut down, raw materials limted, orders have dried up and global demand for the remainder of 2019 is uncertain. While China is mostly back to business with limited orders to fulfill, more than half of the factories in Bangladesh, Cambodia, Vietnam, Turkey, Myanmar, Indonesia and other countries are still shut down as of mid-April.

Note: Figures are provided in USD/month based on currency exchange as of April 1, 2020. Minimum wage policies are updated as per data available at the time of finalizing this report and are based primarily on unskilled wages. Consult sources such as Fair Wage Guide or Wageindicator.org to assess and calculate benchmarks for wages in particular countries and regions not covered here.

Sources: XE.com, News/Analyst Reports

Container Freight Rates for Major Routes

Asia – North America Trade Lanes

US imports from Asia fell to the lowest in 7 years in March as the pandemic prompted shut downs across the US. As a result, carriers have cut capacity on transpacific trade routes, cancelling at least 150 sailings to the West Coast and at least 65 sailings to the East Coast, according to Sea-Intelligence Maritime Consulting. Forecasts for the rest of 2020 are unclear as importers are still at the mercy of virus.

As the US continues to see rising cases of the virus, the impact on US exports is expected to continue through Q2, making it difficult for US importers and shipping companies to forecast and plan through the rest of 2020. Carriers are expenting to use blank sailings to manage capacity assuming inmport volumes pick-up in late Q2 and Q3, which could push prices higher if volumes spike.

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Container Freight Rates for Major Routes Q2 2020 News and Analysis:

The coronavirus pandemic made a significant impact on container freight prices on key Asian, European and North American trade lanes. Export volumes from China, already impacted from an extended Chinese New Year shutdown due to the virus, continued to fall as European and North American importers cancelled back orders and postponed delivery of goods due to business closures. China’s port association predicts a contraction of container traffic of between 10-15% in Q2, following a 20% contraction in February and 5.6% drop in March. Logistics companies have had to slow down operation and reduce capacity.

Asia - Europe Trade Lanes

The usually wide gap between headhaul and backhaul shipping rates on the important Asia-Europe trade lanes is continuing to narrow on reduced demand for China exports due to lockdowns. From early January to mid-April, rates on the Shanghai-Rotterdam route fell by around 34% to $734 per TEU, whereas Rotterdam-Shanghai rates increased by 31% to around $437 per TEU. Carriers have made extensive capacity cuts on Asia-Europe trade lanes, removing around 30% of capacity through June.

Westbound China-Europe spot rates fell only marginally since the end of February, when most of China’s factories opened after an extended Chinese New Year due to virus lockdowns in China.

In contrast, Eastbound, Europe-China spot rates have made gains as European exports increased, partly due to container capacity issues under China’s shutdown, which concentrated exports in late March. Shipping liners have also increased rates on Asia-Europe and Asia-Mediterranean routes for Q2.




Sources: IHS Markit, Joc.com Alphaliner, SeaIntel


8

Container Freight Rates for Major Routes Q2 2020 News and Analysis:

The coronavirus pandemic made a significant impact on container freight prices on key Asian, European and North American trade lanes. Export volumes from China, already impacted from an extended Chinese New Year shutdown due to the virus, continued to fall as European and North American importers cancelled back orders and postponed delivery of goods due to business closures. China’s port association predicts a contraction of container traffic of between 10-15% in Q2, following a 20% contraction in February and 5.6% drop in March. Logistics companies have had to slow down operation and reduce capacity.



Westbound China-Europe spot rates fell only marginally since the end of February, when most of China’s factories opened after an extended Chinese New Year due to virus lockdowns in China.





Sources: IHS Markit, Joc.com Alphaliner, SeaIntel Q2 2020 Retail Sourcing Report


The coronavirus pandemic made a significant impact on container freight prices on key Asian, European and North American trade lanes. Export volumes from China, already impacted from an extended Chinese New Year shutdown due to the virus, continued to fall as European and North American importers cancelled back orders and postponed delivery of goods due to business closures. China’s port association predicts a contraction of container traffic of between 10-15% in Q2, following a 20% contraction in February and 5.6% drop in March. Logistics companies have had to slow down operation and reduce capacities.



Westbound China-Europe spot rates fell only marginally since the end of February when most of China’s factories opened after an extended Chinese New Year due to virus lockdowns in China.



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Currency Exchange Rates

Following are exchange rates and indicators for major currencies commonly factored into global sourcing costing estimations. The coronavirus has kept key trading currencies in flux, with the Euro depreciating to 2-year lows in February against both the USD and the Chinese Yuan. The USD depreciated against the Yuan in Q1 before gaining back strength early in Q2, holding strong as a safe-haven currency as stock markets plummeted. The Chinese government has been relatively successful in propping up their currency by investing in foreign exchange reserves. Most countries have also invested heavily in wide range of stimulus measures, including lowering interest rates, but none have the luxury of China’s vast reserves. Analysts expect the USD to hold strong through 2020, while the Euro recovery will depend on European economic recovery. The Chinese Yuan should remain stable due to government intervention. EUR / USD (April 2019 – April 2020)

EUR / CNY (April 2019 – April 2020)

USD / CNY (April 2019 – April 2020)


The Euro depreciated significantly against the US dollar in Q1 reaching 2-year lows as Europe felt the worst of the pandemic. While analysts are mixed on the direction of EUR/USD exchange, overall forecasts are negative due to weakness in the EU economy.

EUR/USD Low High

2 year 1.06 1.23 1 year 1.06 1.14 1 month 1.06 1.11

After reaching a low against the Chinese Yuan in mid-February, the Euro made back gains late in Q1 and into Q2. China’s economy officially contracted in Q1, for the first time since 1976, with optimistic predictions of 3% GDP growth in 2020. To date, the Yuan has held steady, but is likely to see more flux depending on stimulus measures.

EUR/CNY Low High

2 year 7.40 8.08 1 year 7.49 7.98 1 month 7.74 7.84

The Chinese Yuan appreciated against the USD through most of Q2 before finally reaching pre-coronavirus levels in early Q2. Analysts predict the USD will continue to hold strong, given the view of the dollar as a haven currency in times of crisis.

USD/CNY Low High

2 year 6.29 7.17 1 year 6.70 7.17 1 month 7.03 7.12


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EUR/USD Low High

2 year 1.06 1.23 1 year 1.06 1.14 1 month 1.06 1.11


EUR/CNY Low High

2 year 7.40 8.08 1 year 7.49 7.98 1 month 7.74 7.84


USD/CNY Low High

2 year 6.29 7.17 1 year 6.70 7.17 1 month 7.03 7.12


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EUR/USD Low High

2 year 1.06 1.23 1 year 1.06 1.14 1 month 1.06 1.11


EUR/CNY Low High

2 year 7.40 8.08 1 year 7.49 7.98 1 month 7.74 7.84


USD/CNY Low High

2 year 6.29 7.17 1 year 6.70 7.17 1 month 7.03 7.12


Following are exchange rates and indicators for major currencies commonly factored into global sourcing costing estimations. The coronavirus has kept key trading currencies in flux, with the Euro depreciating to 2-year lows in February against both the USD and the Chinese Yuan. The USD depreciating against the Yuan in Q1 before gaining back strength early in Q2, holding strong as a safe-haven currency as stock markets plummeted. The Chinese government has been relatively successful in propping up their currency by investing in foreign exchange reserves. Most countries have also invested heavily in wide range of stimulus measures, including lowering interest rates, but none have the luxury of China’s vast reserves. Analysts expect the USD to hold strong through 2020, while the Euro recovery will depend on European economy recovery. The Chinese Yuan should remain stable due to government intervention.


EUR/USD Low High

2 year 1.06 1.231 year 1.06 1.141 month 1.06 1.11

After reaching a low against the Chinese Yuan in mid-February, the Euro made back gains late in Q1 and into Q2. China’s economy officially contracted in Q1, for the first time since 1976, with optimistic predictions for 3% GDP growth in 2020. To date, the Yuan has held steady, but is likely to see more flux depending on stimulus measures.

EUR/CNY Low High

2 year 7.40 8.081 year 7.49 7.981 month 7.74 7.84


USD/CNY Low High

2 year 6.29 7.171 year 6.70 7.171 month 7.03 7.12


9



EUR/USD Low High

2 year 1.06 1.231 year 1.06 1.141 month 1.06 1.11

Global Commodity Rates

Metal

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Global Commodity Rates Q2 2020 News & Analysis: As with all global trade inputs, most commodities saw a heavy impact from the coronavirus. Oil was hardest hit, with reduced demand from end-users limiting purchasing and over supply from Russia and OPEC countries. The pressures on commodity prices will impact both commodity suppliers and the producers who face demand contraction if consumers spend less. Even when the pandemic ends, commodity demand could remain weak as the world grapples with a recession. While some analysts predict a rebound in 2021, the forecast for commodities is grim, given uncertainty in the overall economic climate.

Crude Oil

Rubber

Metals

2530354045505560657075

Oil US$ per barrel DatedBrent,lightblend 38API

Dubai,medium, fobDubaiFateh 32APIWestTexasIntermedia 40 API,MidlandTexas

1.01.21.41.61.82.02.2

Rubber, No. 3 Smoked Sheet (RSS3), Singapore ExchangePrice in US cents per kilogram

1904

1734

890

1000

2000

3000

02000400060008000

10000120001400016000180002000022000

Metals US$ per metric ton

Tin Aluminum Copper NickelZinc Lead Iron

Natural rubber prices fell through Q1 as the coronavirus locked down global trade, halting demand. The overall sentiment is that rubber prices will keep pushing downward as the recession intensifies, with less rubber required by the auto industry. With rubber end-users still have holding stocks of rubber, prices are unlikely to rebound significantly even if the economy picks up momentum through Q3/Q4.

Oil prices plummeted through Q1 as demand weakened due to the coronavirus and a supply glut caused by Russia and OPEC releasing too much oil. North American producers ran out of storage space for the oversupply due to the coronavirus, pushing prices into negative territory in April. An agreement by OPEC and Russia to cut supply by a record 9.7 million barrels/day for May/June, has not helped to increase historically low prices.

Metal prices were hit hard in Q1 as the coronavirus took hold in China with a further impact landing after Europe and North America shut down, pushing demand lower. Prices for non-ferrous metals, aluminum, copper and zinc have corrected by 16%, 23% and 20% respectively since early 2020. Similarly, steel prices fell by $70-$80/ metric ton from January, with demand expected to fall in the double digits. Prices are expected to rebound in Q3/Q4, assuming the economy recovers.


10


Crude Oil

Rubber

Metals

2530354045505560657075



1.01.21.41.61.82.02.2


1904

1734

890

1000

2000

3000

02000400060008000

10000120001400016000180002000022000







10


Crude Oil

Rubber

Metals

2530354045505560657075



1.01.21.41.61.82.02.2


1904

1734

890

1000

2000

3000

02000400060008000

10000120001400016000180002000022000







Oil prices plummeted through Q1 as demand weakened due to the coronavirus and a supply glut caused by Russia and OPEC releasing too much oil. North American producers ran out of storage space for the oversupply due to the coronavirus, pushing prices into negative territory in April. An agreement by OPEC and Russia to cut supply by a record 9.7 million barrels/day for May/June, has not helped to increase historically low prices.Natural rubber prices fell through

Q1 as the coronavirus locked down global trade, halting demand. The overall sentiment is that rubber prices will keep pushing downward as the recession intensifies, with less rubber required by the auto industry. With rubber end-users still have holding stocks of rubber, prices are unlikely to rebound significantly even if the economy picks up momentum through Q3/Q4.


Crude Oil

Rubber



As with all global trade inputs, most commodities saw a heavy impact from the coronavirus. Oil was hardest hit, with reduced demand from end-users limiting purchasing and over supply from Russia and OPEC countries. The pressures on commodity prices will impact both commodity suppliers and the producers who face demand contraction if consumers spend less. Even when the pandemic ends, commodity demand could remain weak as the world grapples with a recession. While some analysts predict a rebound in 2021, the forecast for commodities is grim, given uncertainty in the overall economic climate.

Cotton

Wool

While cotton prices fell only marginally through Q1, analysts feel that the full impact of the coronavirus on cotton supply and demand has not yet been felt. Global trade forecasts for cotton remain relatively unchanged for 2020, but with the OECD predicting that global GDP should slow substantially, which should impact demand. Apparel retailers drastically reduced orders, effectively shutting down garment factories which in turn reduces demand on mills and the supply of cotton. Global mill-use lowered by 7.6 million bales for March, a trend likely to continue until the pandemic is under control. With the prospect of a recession, companies are likely to reduce inventories and hold on to cash, keeping prices low.


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Cotton While cotton prices fell only marginally through Q1, analysts feel that the full impact of the coronavirus on cotton supply and demand has not yet been felt. Global trade forecasts for cotton remain relatively unchanged for 2020, but with the OECD predicting that global GDP should slow substantially, which should impact demand. Apparel retailers drastically reduced orders, effectively shutting down garment factories which in turn reduces demand on mills and the supply of cotton. Global mill-use lowered by 7.6 million bales for March, a trend likely to continue until the pandemic is under control. With the prospect of a recession, companies are likely to reduce inventories and hold on to cash, keeping prices low.

Wool

Source: Cotton Inc, News Reports

Following the trend of most other commodities, wool prices have slid to a yearly low on sliding demand and uncertainty due to the coronavirus. Wool production and consumption in China, Italy and other countries severely affected by the pandemic is likely to continue facing downward pressure. Predictions are that key wool producing countries will see a major decline in GDP growth in 2020, with a possible rebound in 2021 assuming the pandemic fades in the next quarter.


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Wool




11


Wool




11


Wool




11


Wool



Sources: Cotton Inc, News Reports

Following the trend of most other commodities, wool prices have slid to a yearly low on sliding demand and uncertainty due to the coronavirus.

Wool production and consumption in China, Italy and other countries severely affected by the pandemic is likely to continue facing downward pressure.

Predictions are that key wool producing countries will see a major decline in GDP growth in 2020, with a possible rebound i n 2021 assuming the pandemic fades in the next quarter.

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Plastics and Synthetic Fibers

A selection of plastic related prices is provided below. These are calculated from offer prices in the Plasticker Material Exchange, which provides an indication of trends.


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Plastics and Synthetic Fibers A selection of plastic related prices is provided below. These are calculated from offer prices in the Plasticker Material Exchange, which provides an indication of trends. Q2 2020 Snapshot: Synthetic fiber prices have held relatively steady through Q1 and into Q2, partially due to low oil prices, but as the global economy enters recession mode, demand could contract. China, which produces much of the world’s synthetic fibers is experiencing a contraction for the first time since 1976 and with continued weakness in Europe and the US, petrochemical prices are likely to trend down through 2020.

Focus Topic: The Impact of the Coronavirus

Impact on The Global Economy While the coronavirus has impacted some countries more than others, global supply chains have been disrupted, demand for goods and services has plummeted, tourism and business travel has declined, stock markets and commodity prices plunged, and unemployment hit record levels. JP Morgan estimates that the world economy contracted by 12% from January to March, with equities falling to an equivalent level of the Great Depression and oil prices diving by 60% in Q1. The difference with past epidemics such as SARS in 2003, or the 2008 Financial Crisis is that now the global economy is much more interconnected, with China playing a significantly larger role in global trade than it did 10 years ago. In 2019, China contributed 17-20% of Global GDP and produces most of the world’s components,

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

Plastics & Fibers, Regrind/ Flakes (Euros/kg)

Nylon

Polyester

ABS

PVC

PP

PS

Sources: IMF data, Plasticker, YarnsandFibers.com Sources: IMF data, Plasticker, YarnsandFibers.com

Focus Topic: The Impact of the CoronavirusImpact on The Global Economy

While the coronavirus has impacted some countries more than others, global supply chains have been disrupted, demand for goods and services has plummeted, tourism and business travel has declined, stock markets and commodity prices plunged, and unemployment hit record levels. JP Morgan estimates that the world economy contracted by 12% from January to March, with equities falling to an equivalent level of the Great Depression and oil prices diving by 60% in Q1.

The difference with past epidemics such as SARS in 2003, or the 2008 Financial Crisis is that now the global economy is much more interconnected, with China playing a significantly larger role in global trade than it did 10 years ago.


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Plastics and Synthetic Fibers A selection of plastic related prices is provided below. These are calculated from offer prices in the Plasticker Material Exchange, which provides an indication of trends. Q2 2020 Snapshot: Synthetic fiber prices have held relatively steady through Q1 and into Q2, partially due to low oil prices, but as the global economy enters recession mode, demand could contract. China, which produces much of the world’s synthetic fibers is experiencing a contraction for the first time since 1976 and with continued weakness in Europe and the US, petrochemical prices are likely to trend down through 2020.

Focus Topic: The Impact of the Coronavirus

Impact on The Global Economy While the coronavirus has impacted some countries more than others, global supply chains have been disrupted, demand for goods and services has plummeted, tourism and business travel has declined, stock markets and commodity prices plunged, and unemployment hit record levels. JP Morgan estimates that the world economy contracted by 12% from January to March, with equities falling to an equivalent level of the Great Depression and oil prices diving by 60% in Q1. The difference with past epidemics such as SARS in 2003, or the 2008 Financial Crisis is that now the global economy is much more interconnected, with China playing a significantly larger role in global trade than it did 10 years ago. In 2019, China contributed 17-20% of Global GDP and produces most of the world’s components,

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

Plastics & Fibers, Regrind/ Flakes (Euros/kg)

Nylon

Polyester

ABS

PVC

PP

PS

Sources: IMF data, Plasticker, YarnsandFibers.com

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Q2 2020 Snapshot:

Synthetic fiber prices have held relatively steady through Q1 and into Q2, partially due to low oil prices, but as the global economy enters recession mode, demand could contract. China, which produces much of the world’s synthetic fibers is experiencing a contraction for the first time since 1976 and with continued weakness in Europe and the US, petrochemical prices are likely to trend down through 2020.

In 2019, Ch ina cont r ibu ted 17-20% o f G loba l GDP and produces most o f the wor ld ’s components,intermediate and finished goods. This enlarges the economic fallout for other countries, severely impacting global growth in 2020. With travel restrictions likely to persist, the large spend of Chinese and other tourism will dry up, impacting those countries where tourism is a substantial part of the economy. To survive the pandemic and economic fallout, companies will likely play safe, holding back on investment and hiring, forcing consumers to moderate their spending, further limiting economic growth.

Even prior to the global pandemic, overall economic growth had slowed, with emerging markets and China seeing low single digit growth compared to the robust prior decade. Optimistic current projections are that global growth will slow to between 1.5% - 2.4% in 2020 (from 2.9% in 2019), depending on how fast the virus can be contained, reaching 3.25% in 2021. Most countries are implementing economic stimulus measures, including wage supports, subsidies/loans for businesses and lowering interest rates to record levels. The trade war between the US and China also negatively impacted global trade and investment. While a resolution was in the works prior to the pandemic, it’s unlikely that the US and China will meet trade targets.

Opportunities for mitigating the fallout of the pandemic include the US and China further reducing tariffs, easing of tension between the US and Europe, settling the UK and the EU’s Brexit concerns and greater government intervention to support liquidity and consumer demand. With interest rates down to 10-year lows, the US has unveiled a $2 trillion fiscal expansion package which includes a $500 billion bailout fund to support hard-hit industries. The EU, China and other countries have taken similar steps to prop up their economies, but it’s unlikely to be enough to pull the global economy out of recession quickly. While difficult to predict global growth prospects at this point, projections are tending towards a worst-case scenario, in which containing the virus will extend through Q2, making an economic rebound in 2021 less certain.

While China appears to have had a milder case of the coronavirus (if we believe Beijing’s small numbers), the financial consequences will be harder to avoid. China’s outbreak reached its height during the Chinese New Year in February, which led to an extended shutdown of most of the country. This delayed delivery of orders into Q2. so Instead of accepting delivery or placing new orders, businesses in Europe, North America and elsewhere are stalling or cancelling orders, extending the impact to Q3 and beyond.

In the past 5-10 years, China has relied heavily on domestic consumption and emerging markets to maintain economic growth, but the pandemic is putting a damper on these plans. Even as China gets back to work, factories are operating well below capacity as export demand has dried up and Chinese consumers have tightened spending. With China’s economy contracting in the first quarter for the first time since 1976, the remainder of 2020 is going to be unfamiliar territory for China. Forecasts for China’s GDP growth in 2020 were revised to 4-5% which still seems optimistic until the virus is contained.

According to the Chinese Government, by late March, most of China’s larger factories and around 75% of smaller businesses were up and running, with 90% of workers back to work. However, reports show that

Impact on China


13

intermediate and finished goods. This enlarges the economic fallout for other countries, severely impacting global growth in 2020. With travel restrictions likely to persist, the large spend of Chinese and other tourism will dry up, impacting those countries where tourism is a substantial part of the economy. To survive the pandemic and economic fallout, companies will likely play safe, holding back on investment and hiring, forcing consumers to moderate their spending, further limiting economic growth.

Even prior to the global pandemic, overall economic growth had slowed, with emerging markets and China seeing low single digit growth compared to the robust prior decade. Optimistic current projections are that global growth will slow to between 1.5% - 2.4% in 2020 (from 2.9% in 2019), depending on how fast the virus can be contained, reaching 3.25% in 2021. Most countries are implementing economic stimulus measures, including wage supports, subsidies/loans for businesses and lowering interest rates to record levels. The trade war between the US and China also negatively impacted global trade and investment. While a resolution was in the works prior to the pandemic, it’s unlikely that the US and China will meet trade targets. Opportunities for mitigating the fallout of the pandemic include the US and China further reducing tariffs, easing of tension between the US and Europe, settling the UK and the EU’s Brexit concerns and greater government intervention to support liquidity and consumer demand. With interest rates down to 10-year lows, the US has unveiled a $2 trillion fiscal expansion package which includes a $500 billion bailout fund to support hard-hit industries. The EU, China and other countries have taken similar steps to prop up their economies, but it’s unlikely to be enough to pull the global economy out of recession quickly. While difficult to predict global growth prospects at this point, projections are tending towards a worst-case scenario, in which containing the virus will extend through Q2, making an economic rebound in 2021 less certain.

Impact on China While China appears to have had a milder case of the coronavirus (if we believe Beijing’s small numbers), the financial consequences will be harder to avoid. China’s outbreak reached its height during the Chinese New Year in February, which led to an extended shutdown of most of the country. This delayed delivery of orders into Q2. so Instead of accepting delivery or placing new orders, businesses in Europe, North America and elsewhere are stalling or cancelling orders, extending the impact to Q3 and beyond.

In the past 5-10 years, China has relied heavily on domestic consumption and emerging markets to maintain economic growth, but the pandemic is putting a damper on these plans. Even as China gets back to work, factories are operating well below capacity as export demand has dried up and Chinese consumers have tightened spending. With China’s economy contracting in the first quarter for the first time since 1976, the remainder of 2020 is going to be unfamiliar territory for China. Forecasts for China’s GDP growth in 2020 were revised to 4-5% which still seems optimistic until the virus is contained.

According to the Chinese Government, by late March, most of China’s larger factories and around 75% of smaller businesses were up and running, with 90% of workers back to work. However, reports show that

13


Impact on Supply Chains

Impact on Developing Countries

logistics bottlenecks and subdued demand are an issue. Trucking capacity remains inadequate as workers face quarantine challenges, resulting in freight and clearance delays on imports and exports. To support the economy, he Chinese State Council has reduced or exempted employer contributions to pension, unemployment and work injury insurance for 3-5 months, saving employers 10-15% in payouts. They also announced infrastructure projects worth over US$7 trillion, beginning in 2020 and are reducing import tariffs and handing out vouchers to encourage domestic consumption.

The pandemic has been a true test for global supply chains, with stockpiling and sudden drops in demand making forecasting difficult. Freight transportation, warehousing and fulfillment have all been challenged by labor shortages, lockdowns and variability in demand. For example the US is now faced with a supply glut of oil due to reduced demand, without adequate storage. Shortages of workers is another issue, even for essential logistics services, making it difficult to move container freight and clear customs, creating bottlenecks and increasing logistics costs.

A prolonged delay in getting China’s manufacturing up to speed will add to weakness in the manufacturing sectors of many countries who rely on China for intermediate and finished goods. The impact of suspending production around the globe affects suppliers, downstream partners and logistics businesses. Daegu, a key manufacturing center in South Korea has shut down much of its production, including Samsung Electronics, and LG. Lombardy, the Italian region hit hard by the virus and mostly shut down, is Italy’s industrial center, representing 40% of the country’s GDP.

Developing countries are feeling a heavy impact from the Coronavirus, which could worsen as the global economy falters. Initially, some countries benefited from the China shut down by picking up orders, but that changed when the virus hit. Low-cost sourcing locations such as Bangladesh, Cambodia, India, Turkey and Eastern Europe are seeing widespread factory shutdowns, with cancelled orders, limited raw material inputs and large unemployment. Countries in Africa and Asia that rely on oil, commodities and finished good exports will suffer more than developed countries given they are still operating on low minimum wages with few financial reserves, weak healthcare and insufficient funds to prop up their economies.


14

logistics bottlenecks and subdued demand are an issue. Trucking capacity remains inadequate as workers face quarantine challenges, resulting in freight and clearance delays on imports and exports. To support the economy, he Chinese State Council has reduced or exempted employer contributions to pension, unemployment and work injury insurance for 3-5 months, saving employers 10-15% in payouts. They also announced infrastructure projects worth over US$7 trillion, beginning in 2020 and are reducing import tariffs and handing out vouchers to encourage domestic consumption.

Impact on Supply Chains The pandemic has been a true test for global supply chains, with stockpiling and sudden drops in demand making forecasting difficult. Freight transportation, warehousing and fulfillment have all been challenged by labor shortages, lockdowns and variability in demand. For example the US is now faced with a supply glut of oil due to reduced demand, without adequate storage. Shortages of workers is another issue, even for essential logistics services, making it difficult to move container freight and clear customs, creating bottlenecks and increasing logistics costs. A prolonged delay in getting China’s manufacturing up to speed will add to weakness in the manufacturing sectors of many countries who rely on China for intermediate and finished goods. The impact of suspending production around the globe affects suppliers, downstream partners and logistics businesses. Daegu, a key manufacturing center in South Korea has shut down much of its production, including Samsung Electronics, and LG. Lombardy, the Italian region hit hard by the virus and mostly shut down, is Italy’s industrial center, representing 40% of the country’s GDP.

Impact on Developing Countries Developing countries are feeling a heavy impact from the Coronavirus, which could worsen as the global economy falters. Initially, some countries benefited from the China shut down by picking up orders, but that changed when the virus hit. Low-cost sourcing locations such as Bangladesh, Cambodia, India, Turkey and Eastern Europe are seeing widespread factory shutdowns, with cancelled orders, limited raw material inputs and large unemployment. Countries in Africa and Asia that rely on oil, commodities and finished good exports will suffer more than developed countries given they are still operating on low minimum wages with few financial reserves, weak healthcare and insufficient funds to prop up their economies.

The reality of global supply chains is that countries are interdependent in their production of goods and with most of the world relying on China in some way, their fates are tied together. For example India, the biggest manufacturer of generic medicines, imports over half its active pharmaceutical ingredients and is heavily dependent on China for raw materials and manufacturing inputs. While the pandemic continues, it will be hard to maintain export numbers which could lead to a global shortage of medicine and other products. While the EU and the US have looked at India as a viable sourcing alternative for textiles, homeware, ceramic goods, furniture and other products, India’s supply chain and regulatory ecosystem does not match China’s. Some see opportunity in this crisis, to collaborate more closely by reducing trade barriers and tariffs and retooling factories to diversify production, but the reality is that the coronavirus is more like a once in a century event, that only time will repair.

The reality of global supply chains is that countries are interdependent in their production of goods and with most of the world relying on China in some way, their fates are tied together. For example India, the biggest manufacturer of generic medicines, imports over half its active pharmaceutical ingredients and is heavily dependent on China for raw materials and manufacturing inputs. While the pandemic continues, it will be hard to maintain export numbers which could lead to a global shortage of medicine and other products. While the EU and the US have looked at India as a viable sourcing alternative for textiles, homeware, ceramic goods, furniture and other products, India’s supply chain and regulatory ecosystem does not match China’s.

Some see opportunity in this crisis, to collaborate more closely by reducing trade barriers and tariffs and retooling factories to diversify production, but the reality is that the coronavirus is more like a once in a century event, that only time will repair.

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Q2 2020 · 2020-04-29 · Q2 2020 Retail Sourcing Report. Purchasing Manager’s Index (PMI) To help understand industry and economic conditions in a country, the PMI Index tracks