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The numbers:The Institute for Supply Management said its manufacturing index fell to 41.5% last month from 49.1% in March. This is the lowest since April 2009. Economists surveyed by MarketWatch had forecast the index to total 35%. Any reading below 50 shows shrinking activity.
What happened: The details of the report were grim. The index for new orders dropped 15.1 points to 27.1%, the biggest monthly drop since 1951. Production falling a steeper 20.2 points to 27.5%, the lowest level on record. Customer inventories grew, which is negative for the future. The employment index decreased 16.3 points to 27.5%. That’s the lowest level since 1949 and the largest one-month drop since the series began in 1948.
Only a rise in supply deliveries index kept the index from falling even deeper, economists said.
What’s more, 16 of the 18 industries tracked by the ISM reported declines. That’s another bad sign. Only paper products and foods products rose in April.
In a separate release, IHS Markit reported its U.S. manufacturing PMI sank to 36.1 in April, down from the “flash” estimate of 36.9. The index stood at 48.5 in March.
Big picture: The decline reflects the abrupt shutdown in manufacturing activity due to efforts to stop the spread of COVID-19.
What ISM says: Timothy Fiore, chair of the ISM manufacturing business survey committee, said the worst might be behind the manufacturing sector. He said the bottom hadn’t been reached but “we can see it.” There would be 4-6 more weeks of decline, but not at the rate seen so far, as uncertainty is ebbing, Fiore told reporters.
What outside economists say? “Parts of the country are beginning to slowly emerge from lockdown, but it will take time before manufacturing starts firing on all cylinders. The backdrop for manufacturers is very bleak, with collapsing global demand, ongoing supply chain disruptions, and high levels of uncertainty all posing very significant challenges. We do not expect output losses to be recouped until 2021,” said Gregory Daco, chief U.S. economist at Oxford Economics.
Market reaction: U.S. equity benchmarks pushed lower on Friday after the report. Stocks had opened down on renewed tension between the White House and China. The S&P 500 index SPX, -2.90% dropped 62 points or 2.3% to 2,850 in late- morning trading.
