Economic Activity in the Manufacturing Sector Contracted in April - Modern Distribution Management

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Economic Activity in the Manufacturing Sector Contracted in April

The New Orders Index registered 27.1%, a decrease of 15.1% from the March reading.

Economic activity in the manufacturing sector contracted 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 Business.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee: "The April PMI registered 41.5%, down 7.6% from the March reading of 49.1%. The New Orders Index registered 27.1%, a decrease of 15.1% from the March reading of 42.2%. The Production Index registered 27.5%, down 20.2% compared to the March reading of 47.7%. The Backlog of Orders Index registered 37.8%, a decrease of 8.1% compared to the March reading of 45.9%. The Employment Index registered 27.5%, a decrease of 16.3% from the March reading of 43.8%. The Supplier Deliveries Index registered 76%, up 11% from the March reading of 65%, limiting the decrease in the composite PMI®.

"The Inventories Index registered 49.7%; 2.8% higher than the March reading of 46.9%. The Prices Index registered 35.3%, down 2.1% compared to the March reading of 37.4%. The New Export Orders Index registered 35.3%, a decrease of 11.3% compared to the March reading of 46.6%. The Imports Index registered 42.7%, a 0.6% increase from the March reading of 42.1%.

"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-sector contraction not seen since April 2009, with a strongly negative trajectory. Demand contracted heavily, with the New Orders Index contracting at a very strong level, again pushed by new export order contraction, Customers' Inventories Index approaching a level that is considered a negative for future production, and 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 negatively (a combined 36.5% decrease) to the PMI® calculation, with activity dramatically contracting due to plant closures and lack of demand. Inputs — expressed 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 disruptions in domestic and global supply chains, driven primarily by supplier plant shutdowns. Inventory contraction slowed due to throughput issues. Inputs contributed positively (a combined 13.8% increase) to the PMI calculation. (The Supplier Deliveries and Inventories indexes directly factor into the PMI; the Imports Index does not.) Prices continued to contract (and at a faster rate in April), supporting a negative outlook.

"The coronavirus pandemic and global energy market weakness continue to impact all manufacturing sectors for the second straight month. Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest. Transportation Equipment and Fabricated Metal Products are the weakest of the big six sectors," says Fiore.

Of the 18 manufacturing industries, the two that reported growth in April are: Paper Products; and Food, Beverage & Tobacco Products. The 15 industries reporting contraction in April, in order, are: Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Textile Mills; Fabricated Metal Products; Nonmetallic Mineral Products; Machinery; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Wood Products; Miscellaneous Manufacturing; Computer & Electronic Products; Primary Metals; and Chemical Products.

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