ISM: Manufacturing Shrinks In April, Economy Contracts After 131 Months Economic activity in the manufacturing sector contract- ed in April, and the overall economy contracted after 131 consecutive months of expansion, say the nation’s supply executives in the latest Manufacturing ISM Report On Busi- ness. The report was issued last week by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Manage- ment (ISM) Manufacturing Business Survey Committee: “The April PMI registered 41.5 percent, down 7.6 percent- age points from the March reading of 49.1 percent. The New Orders Index registered 27.1 percent, a decrease of 15.1 percentage points from the March reading of 42.2 per- cent. The Production Index registered 27.5 percent, down 20.2 percentage points compared to the March reading of
47.7 percent. The Backlog of Orders Index registered 37.8 percent, a decrease of 8.1 percentage points compared to the March reading of 45.9 percent. The Employment Index registered 27.5 percent, a decrease of 16.3 percentage points from the March reading of 43.8 percent. The Sup- plier Deliveries Index registered 76 percent, up 11 percent- age points from the March reading of 65 percent, limiting the decrease in the composite PMI. “The Inventories Index registered 49.7 percent; 2.8 per- centage points higher than the March reading of 46.9 per- cent. The Prices Index registered 35.3 percent, down 2.1 percentage points compared to the March reading of 37.4 percent. The New Export Orders Index registered 35.3 percent, a decrease of 11.3 percentage points compared to the March reading of 46.6 percent. The Imports Index registered 42.7 percent, a 0.6-percentage point increase from the March reading of 42.1 percent. “Comments from the panel were strongly negative
(three negative comments for every one positive comment) regarding the near-term outlook, with sentiment clearly impacted by the coronavirus (COVID-19) pandemic and continuing energy market recession. The PMI indicates a level of manufacturing-sec- tor contraction not seen since April 2009, with a strongly negative trajectory. Demand contracted heavily, with the (1) New Orders Index contracting at a very strong level, again pushed by new export order contrac- tion, (2) Customers’ Inventories Index ap- proaching a level that is considered a nega- tive for future production, and (3) Backlog of Orders Index strongly contracting, in spite of a lack of production during the period. Consumption (measured by the Production and Employment indexes) contributed neg- atively (a combined 36.5-percentage point decrease) to the PMI calculation, with ac- tivity dramatically contracting due to plant closures and lack of demand. Inputs — ex- pressed as supplier deliveries, inventories and imports — strengthened again due to supplier delivery issues that were partially offset by continuing imports sluggishness. The delivery issues were the result of dis- ruptions in domestic and global supply chains, driven primarily by supplier plant shutdowns. Inventory contraction slowed due to throughput issues. Inputs contribut- ed positively (a combined 13.8-percentage point increase) to the PMI calculation. (The Supplier Deliveries and Inventories indexes directly factor into the PMI; the Imports In- dex does not.) Prices continued to contract (and at a faster rate in April), supporting a negative outlook.
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May 11, 2020
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