ISM manufacturing index falls to lowest level in 11 years
By Michele Maatouk
Date: Friday 01 May 2020
(Sharecast News) - Activity in the US manufacturing sector fell sharply in April, albeit not as much as expected, according to data released on Friday by the Institute for Supply Management.
The ISM index declined to 41.5 from 49.1 in March, coming in ahead of expectations for a reading of 36.9 but still marking its worst level in 11 years. A level above 50 indicates expansion while a reading below signals contraction.
Timothy R. Fiore, chair of the ISM, said: "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."
The new orders index ticked fell to 27.1 in April from 42.2 in March, while the production index slumped to 27.5 from 47.7. The employment index slid to 27.5 from 43.8 and the prices paid gauge printed at 35.3 from 37.4 percent in March.
Michael Pearce, senior US economist at Capital Economics, said the drop in the headline index was more modest than expected and leaves it at a level consistent with GDP contracting at a 5% annualised pace, similar to the decline seen in the first quarter.
"We fear those surveys are not capturing the true scale of the downturn, however, with the incoming hard data pointing to GDP falling at a 40% annualised rate this quarter," he said.
"We do not know whether the ISM index was artificially inflated by problems with non-responses from firms that had completely closed. But the fact that the surveys have not fallen further may be some tentative good news that manufacturing hasn't completely collapsed while most of the services sector entered an extended hibernation."
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