Manufacturing Crashed in April But Not as Badly as Expected

An abandoned home is seen in the background behind a derelict factory in the hard-hit industrial town of Gary, Indiana is seen on November 2, 2011. Gary, Indiana is using its thousands of abandoned buildings and proximity to Chicago to draw the film industry to this hard-hit industrial town. But …
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The U.S. manufacturing sector suffered an unprecedented contraction in April, slumping to its worst level in 11 years.

Factory closures, layoffs, furloughs, and a crash in new orders all weighed on the sector, the Institute for Supply Management’s survey showed Friday. Customer inventories rose high enough that they will no longer support growth in future months.

The ISM Manufacturing Index fell to 41.5 from 49.1. Readings below 50 on the index signal a contraction.

Yet that was better than forecast. Economists had expected a reading of 35. A rise in inventories boosted the April numbers while nearly every other category showed a decline.

New orders fell 15.1 points to 27.1. Production dropped 20.2 points to 27.5. The employment index declined 16.3 points to 27.5. Prices slumped as well.

Comments from the businesses surveyed were strongly negative.

“COVID-19 has destroyed our market and our company. Without a full recovery very soon, and some assistance, I fear for our ability to continue operations,” an executive in a Nonmetallic Mineral Products business said.

Manufacturers reported shortages of soaps, disinfectants, hand sanitizers, masks, and personal protective gear.

A separate survey by IHS Markit, also released Friday, showed a similarly sharp contraction.

“April saw the manufacturing sector struck hard by the COVID-19 pandemic, with output falling to an extent surpassing that seen even at the height of the global financial crisis,” IHS Markit chief business economist Chris Williamson said.

Both reports showed domestic and foreign demand plunging, but new export orders fell fastest, highlighting the global economic impact of the pandemic.

 

 

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