Services sector to bear brunt of nCoV outbreak

by Czeriza Valencia (The Philippine Star), 3 Feb 2020

MANILA, Philippines — The effect of the spread of the Wuhan coronavirus on industry will be more clearly seen this month with the service sector expected to take the initial impact, said London-based Capital Economics.

In a new brief over the weekend, the macroeconomy research firm said Purchasing Managers Indexes (PMIs) for most Emerging Asia economies improved slightly in December and is expected to have sustained the improvements in business conditions in January as it is still too early to see the impact of the contagion on industry.

“PMIS for most Emerging Asia improved slightly in December, after nudging up in November. The PMIs in January should edge up again, given that they are probably too early to show any impact from the coronavirus outbreak,” said Capital Economics.

“Overall though, we will have to wait for the February PMIs to have a good indication of how the coronavirus is affecting industry. The initial impact of the virus is likely to be concentrated in the service sector,” it added.

PMIs provides a quick overview of the health of the manufacturing sector based on several indicators such as new orders, output, job creation, supplier delivery times, and inventories.

The firm noted that China’s decision to lock down Hubei provinces and extend nationwide factory closures nationwide will soon start to weigh on industrial output and disrupt supply chains in Emerging Asia.

“Many countries in the region export a large volume of intermediate goods to China’s industrial sector. Korea, Malaysia, Taiwan and Vietnam will likely be the most exposed,” said Capital Economics.