United States: ISM manufacturing index slides back into contractionary territory in March
The Institute for Supply Management (ISM) manufacturing index slipped to 49.1 in March from 50.1 in February, but came in above market expectations of 44.5. Consequently, the index fell below the 50-threshold that separates expansion from contraction in the sector.
The coronavirus pandemic is putting a dent in U.S. manufacturing, while tensions between oil producing nations which have sparked a full-blown price war is complicating matters for many sectors. New orders shrank markedly in March, hitting an almost 11-year low, pushed down by a slump in new export business. Anemic demand led to another contraction in employment, which fell at the sharpest pace since May 2009. Production also fell, with output expanding in only two of the top six industries, dragged on by falling demand, markedly lower backlogs of work, and supplier constraints.
Turning to the supply side, supplier delivery times slowed again in March, with the sub index hitting a near one-year high due to ongoing supply chain constraints in China. Consequently, inventories fell but at a weaker rate than in February.
The ISM prices sub-index fell sharply in March to their lowest level since January 2016, largely due to falling base metals and energy prices.
Comments from ISM respondents highlight the virus’ pervasive impact on the manufacturing sector. One panelist in plastics and rubber production stated “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”, while a machinery manufacturer cited “a 30-percent reduction in productivity in our factory”.