Unlike a Typical Downturn, Services Have Been Hit Hardest...So Far

Early data on global business activity is beginning to trickle in, and it’s revealing an across-the-board collapse in service sector activity. Manufacturing has likewise sunk into contractionary territory but has not (yet) turned down as severely. So far, that trend belies what we normally see in economic downturns, where services tend to contract slower than the total economy. For example, in the last three recessions, Food Services & Drinking Places on average experienced only one-fifth the decline of the total U.S. economy and was among the least affected sectors.  In the ongoing coronavirus downturn, that same industry is already among the hardest hit.

As economic pain spreads through the global economy, we’ll be keeping a close eye on whether manufacturing gets hit by a collapse in global demand – or whether societies’ growing medical, security, and production needs will help keep the sector afloat. It's worth noting that the latest purchasing managers' index figures for manufacturing do not yet reflect a number of more recent sectoral developments (for example, a rising number of plant closures across North America), warranting close monitoring in the weeks and months ahead.