Orders and employment at U.S. factories contracted in March at the quickest pace in 11 years as producers grappled with pandemic-related demand destruction, Institute for Supply Management data showed Wednesday.
The purchasing managers group’s gauge of bookings tumbled 7.6 points to 42.2, the lowest since March 2009, while its employment index slid to 43.8, the weakest since May of that year. Readings less than 50 indicate shrinking activity. Ten of the 18 manufacturing industries reported growth in March.
The ISM’s headline manufacturing measure fell less than forecast, registering a more-modest 1 point drop to 49.1, due to a sharp increase in delivery times that often signals a flurry of demand. Instead, the latest jump in the supplier deliveries index, the biggest since 2005, reflects the virus outbreak that’s led to dysfunction in global supply lines and created a sales vacuum as many businesses close.
“I’ve never seen anything move as quickly as this,” Timothy Fiore, chair of the ISM’s manufacturing survey committee, said in a call with reporters, citing furloughs and layoffs last week that are likely to be reflected in jobless claims data due Thursday. “We definitely haven’t hit the bottom.”
The median forecast in a Bloomberg survey of economists called for a decline to 44.5 in the ISM factory index. ISM research manager Kristina Cahill said its survey opens at the beginning of the month and closes at the end, and respondents are asked to answer as late in the period as possible to provide a fuller picture of activity.
ISM Industry Comments
“Covid-19 is impacting China’s raw material supply chain. We are now seeing revenue impact in that region.” – Electronics
“Covid-19 impact has extended to Europe and North America. The virus escalation is affecting our purchasing and logistics operations. We have incurred air-shipment and production interruptions due to shortages of raw materials and components.” – Transportation Equipment
“Covid-19’s spread in the U.S. may start impacting our domestic business. As for Asian suppliers, they are starting to get back up to speed.” – Fabricated Metals
“All North American manufacturing plants have ceased operations or drastically scaled back as a result of customer plant closings and other responses to Covid-19.” – Plastics
Production also shrank in March, with the ISM’s measure of output falling to 47.7 from 50.3. The gauge of manufacturer inventories, the final component that is used to calculate the overall ISM index, was little changed and still contracting.
The group’s gauge of prices slumped to a more than four-year low, partly reflecting a plunge in the cost of crude oil amid both a price war between Russia and Saudi Arabia and weaker demand.
The drop in the factory purchasing managers’ index was preceded by other, more-dismal regional reports. The Federal Reserve banks of Dallas, New York, Philadelphia and Kansas City all reported record monthly declines in their manufacturing gauges.
— With assistance by Kristy Scheuble
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