Five manufacturing sectors could lead the way in the recovery from the global COVID-19 pandemic that has delivered ‘the fastest and deepest shock to industry on record’.

The list of five, compiled by forecasting firm Oxford Economics, were pharmaceutical producers, food and beverage suppliers, chemical manufacturers, non-metallic metals firms and electronics makers.

The rationale behind these five being key to the recovery is their solid pre-pandemic balance sheets and the fact they suffered lower drops in production during the March-May downturn.

Food suppliers, for example, are benefiting from the trend in people spending more in supermarkets and on takeaways.

“Overall, given its essential nature, we expect food and beverage production to experience a decent rebound, consistent with the pattern observed in the recovery stage after previous global recessions,” Oxford Economics said in a recent report.

Australia has been named as one of the economies best positioned to recover from the COVID-19 economic slump.

Some ASX small cap pharma stocks that are doing well include Somnomed (ASX:SOM) and Genetic Signatures (ASX:GSS).

Recovery scorecard

Oxford Economics selected the five industries on the basis of its Manufacturing Recovery Scorecard, a framework for evaluating an industry’s recovery profile.

The scorecard uses a set of criteria such as supply-chain diversification, solvency and liquidity, human contact, capital intensity and track record in prior economic recoveries.

“The widespread lockdowns and restrictions of people’s movements had led to a sharp reduction in sectoral activity, in particular for high-contact services such as travel, recreation, accommodation and catering,” Oxford Economics lead economist Stephen Foreman said.

The economics consultancy said global industrial production lifted slightly in May as economies gradually reopened after hitting a low point in April.

 

Headwinds and automation

Aerospace and automotive companies and firms making industrial machinery may not be the best places for investors to put their hard-earned cash.

Even as social restrictions are eased in certain places, these high-contact sectors are likely to see reduced demand for their products until virus transmission risks are reduced, Oxford Economics noted.

“Aircraft manufacturers face significant headwinds due to the slow rebound in air travel and their lingering vulnerability to supply-chain disruptions.”

The consultancy firm does not expect passenger air travel to return to pre-COVID-19 levels until 2023.

“The auto sector’s weak financial position is concerning, though the industry is better placed to adapt to social distancing due to its automated processes, and global car sales show signs of improvement, led by China,” Oxford Economics said.

The COVID-19 pandemic has shone a light on just how fragile global supply chains can be.

Global manufacturing is expected to remain below its pre-virus level until mid-2021.