Board Converting News, April 6, 2020

ISM: Manufacturing Shrinks (CONT’D FROM PAGE 8)


ed subindexes that directly factor into the PMI, along with New Orders, Production, Employment and Inventories. Supplier Deliveries is the only ISM® Report On Business index that is inversed — a reading of above 50 percent indicates slower deliveries, which is typical as the econo- my improves and customer demand increases. However, the high index reading in March was primarily a product of coronavirus-related supply problems. “The Inventories Index registered 46.9 percent, 0.4 percentage point higher than the February reading of 46.5 percent. The Prices Index registered 37.4 percent, down 8.5 percentage points compared to the February reading of 45.9 percent. The New Export Orders Index registered 46.6 percent, a decrease of 4.6 percentage points com- pared to the February reading of 51.2 percent. The Imports Index registered 42.1 percent, a 0.5 percentage point de- crease from the February reading of 42.6 percent. “Comments from the panel were negative regarding the near-term outlook, with sentiment clearly impacted by the coronavirus (COVID-19) pandemic and energy market volatility. The PMI returned to contraction territory, and with a negative trajectory. Demand slumped, with (1) the New Orders Index contracting at a strong level, in part pushed by new export order contraction, (2) the Customers’ Inven- tories Index remaining at ‘too low’ status, but increasing at a level considered a negative for future production, (3) the Backlog of Orders Index contracting again, at a mod- erate rate. Consumption (measured by the Production and Employment indexes) contributed negatively (a combined 5.7-percentage point decrease) to the PMI calculation, with activity contracting at a faster rate. “Inputs — expressed as supplier deliveries, inventories and imports — strengthened in March, due primarily to sup- plier delivery difficulties; inventory contraction stabilized. Despite imports contracting at strong rates due primarily to coronavirus impacts, inputs contributed positively to the PMI calculation. (The Imports Index does not directly factor into the PMI.) Prices continued to contract (and at a faster rate in March), supporting a negative outlook. “The coronavirus pandemic and shocks in global en- ergy markets have impacted all manufacturing sectors. Among the six big industry sectors, Food, Beverage & To- bacco Products remains strongest, followed by Chemical Products, which in addition to the pharmaceutical compo- nent, is a significant contributor to the Food, Beverage & Tobacco Products Industry and beneficiary of low energy and feedstock prices. Transportation Equipment and Pe- troleum & Coal Products are the weakest sectors. Senti- ment regarding near-term growth this month is strongly negative, by a 2-to-1 ratio,” says Fiore. Of the 18 manufacturing industries, the 10 that reported growth in March — listed in order — are: Printing & Related Support Activities; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Wood Products; Pa- per Products; Chemical Products; Computer & Electronic


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April 6, 2020

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