Manufacturers’ Survey (Cont’d from Page 1)
percent in the second quarter, the largest quarterly de- cline in the history of the series, which dates to 1947. In addition, manufacturing production dropped 20.2 percent between February and April, with employ- ment in the sector off by a whopping 1,363,000 over that time frame. The Institute for Supply Management® reported that manufacturing activity expanded in August at the fastest pace since November 2018, buoyed by growth in orders that was the strongest since January 2004. Though it will take a while for output and hiring in the sector to recover to pre-recessionary levels, the survey indicates that production is on the rise. Higher Production Indeed, 50.6 percent of manufacturers report high- er production in the third quarter than in the second, with 22.7 percent predicting output will be lower and 24.8 percent feeling there will be no change (Figure 3). Similarly, 30.0 percent and 26.8 percent of those com- pleting the survey anticipate that hiring and capital spending will increase in the third quarter, respective- ly, with roughly 45 percent seeing no change in either measure relative to the second quarter. Relief funds played a significant role in helping businesses weather these challenges. Of the 82.7 percent of respondents who say COVID-19 had or will have a negative impact on their cash flow, 72.1 percent noted they had ob- tained funds through the Paycheck Protection Pro- gram, Main Street Lending Program or other liquidity programs. More importantly, of those firms taking ad- vantage of such programs, 91.6 percent reported that those funds helped keep their business afloat, retain their workforce or meet other necessary expenses. Returning To Normal Respondents were asked when they expect revenues to return to pre-pandemic levels. Sixty-two percent expect their firm’s revenues will not get back to pre- COVID-19 levels until 2021 or later (Figure 4). Just 17.6 percent note their revenues had already recovered, with 12.5 percent predicting them to bounce back in either the third or fourth quarter of 2020. The NAM Manufacturing Outlook Index measured 44.5 in the third quarter, up from 23.3 in the second quarter (Figure 5).The latest data suggest the current outlook is 0.55 standard deviations below the histori- cal average. Over the previous five quarters, large manufacturers (i.e., those with 500 or more employees) have been the least positive in their outlook likely due in part to trade uncertainties. That turned around in the latest
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4 September 14, 2020 Flexo Market News
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