U.S. factories in March saw orders fall at the fastest pace in 11 years and manufacturers slashed output and jobs as the global economy froze-up in response to the coronavirus pandemic and government measures aimed at combating the disease.
The Institute for Supply Management said its manufacturing index dropped to 49.1 in March from 50.1 in February. Readings below 50 indicate contraction, while those above 50 indicate expansion. The index has struggled since midway through last year and has been below 50 in six of the past eight months.
IHS Markit said its seasonally adjusted final U.S. manufacturing purchasing managers index, which has less exposure to companies with global exposure, fell to 48.5 in March from 50.7 in February.
Both scores were better than expected but that is largely being overlooked by markets who expect the readings to get much worse in coming months. Wednesday morning’s employment report from ADP and Moody’s showed far fewer jobs losses than expected because many layoffs hit the tape too late in the month to be counted.
“The coronavirus pandemic and shocks in global energy markets have impacted all manufacturing sector,” said ISM’s Tim Fiore.
“Driving the overall decline were the sharpest downturns in output and new orders since the financial crisis in 2009 amid weak domestic and foreign demand conditions following the outbreak of coronavirus disease 2019,” IHS Markit said. “Emergency measures to tackle the spread of the virus also led to a solid fall in workforce numbers and business confidence, as factories shutdown and laid off staff.”
“The final PMI data for March are even worse than the initial flash estimate, with manufacturing output slumping to the greatest extent since the height of the global financial crisis in 2009,” said Chris Williamson, chief economist of IHS Markit said.
New orders, employment, production, and prices declined, the ISM survey showed. Despite indicating a contraction for manufacturing, the ISM reading is consistent with growth in the broader economy. That, however, is likely a reflection of the index not picking up the full extent of the shutdowns and drag from coronavirus fears.