ISM manufacturing plunged to an 11-year low in April, data out Friday showed.
The gauge printed 41.5, the worst since April of 2009. That was actually far better than consensus, which was looking for 36. The range was 30 to 45 from 72 economists.
This is just further confirmation of what everyone in the country already knows – the US is in a deep economic slump the likes of which most living people have never witnessed.
“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 pandemic and continuing energy market recession”, ISM chair Timothy Fiore said, stating the obvious.
Some of the subindexes were a predictable disaster. Production, for example, tumbled more than 20 points to 27.5, the worst on record. New orders plunged to 27.1, a dramatic 15-point drop. Employment was awful. And on and on.
Yet again, it looks as though the headline gauge is being inflated materially by an elevated read on the supplier deliveries index. This was readily apparent in March and was even more prominent in April. To wit, from the report:
The delivery performance of suppliers to manufacturing organizations was slower in April, as the Supplier Deliveries Index registered 76 percent. This is 11 percentage points higher than the 65 percent reported in March. The index reached its highest level since April 1974, when it registered 82.1 percent. The 11-percentage point increase is the largest one-month jump since January 1976, when the Supplier Deliveries Index increased 12.8 percentage points.
That ridiculous print (76 on the deliveries index) helped put a floor under the composite gauge.
“Suppliers continue to struggle to deliver, at a much stronger rate compared to March”, Fiore remarked. “The COVID-19 pandemic was the primary cause of global and domestic supply chain disruptions, with suppliers impacted by plant shutdowns, transportation challenges and the continuing difficulty in importing parts and components”.
For what it’s worth, below is the updated “state of the union” visual, which just shows you the extent of the damage on some of the basic headline numbers.
Normally, this would be a disaster in an election year, but because this is an “act of God” (so to speak), some voters will give Trump a pass, even as they criticize the administration’s response to the crisis and the president’s at times “questionable” recommendations (e.g., the suggestion that injecting household cleaner into one’s veins could be an effective therapeutic).
Although the president’s approval rating now sits at a halfway-decent 49, he’ll still need a scapegoat when it comes to the domestic economy. That is, “act of God” or no, voters aren’t keen on recessions, and if the downturn lasts too long, some of the blame will fall (rightly or wrongly) on the White House. In that regard, you can (and should) expect more in the way of recriminatory bombast aimed at China.
Via ISM
WHAT RESPONDENTS ARE SAYING
- “Thirty-percent decrease for April due to COVID-19 impact on both customers and suppliers.” (Computer & Electronic Products)
- “Production stopped, other than to make hand sanitizer for those in need.” (Chemical Products)
- “COVID-19 has created a wave of activities, including vendors closing, vendors focusing only on the medical industry, employees not coming to work, delayed shipments from overseas, [and] etcetera.” (Transportation Equipment)
- “The food processing B2B space remains steady. We are weathering the storm. There is a fortunate increased need for packaged foods. Softening is showing through in some products that find their way into food service and lodging.” (Food, Beverage & Tobacco Products)
- “Our refinery is losing money making gasoline due to the falling demand.” (Petroleum & Coal Products)
- “We supply the construction industry in various ways, where the slowdown has been a bit slower than most industries. It is, however; beginning to impact our business, and we see more challenges on the horizon.” (Fabricated Metal Products)
- “The company I work for manufactures personal protective equipment [PPE], specifically N95 masks, face shields, as well as selling protective clothing and hand protection. In the area of PPE, our backlog has spiked to numbers we have never seen. While no doubt some of the backorders will be canceled, many of the orders are longer term commitments from [the] U.S. government.” (Apparel, Leather & Allied Products)
- “Our packaging business is starting to see signs of a slowdown in May after two strong months into COVID-19.” (Paper Products)
- “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.” (Nonmetallic Mineral Products)
- “Dealing with the effects of coronavirus and having 65 percent of our operations down.” (Furniture & Related Products)
