The headline ISM manufacturing print has been bereft of meaning for the past two months due not just to the myriad inherent absurdities of looking at PMIs in and around the kind of outright economic collapse the world witnessed in March and April, but also due to distortion from record high readings on the deliveries gauge.
With those caveats out of the way, ISM came in slightly worse than expected for May at 43.1. The market was looking for 43.8.
Obviously, we’re still in severely depressed territory, even as the deliveries gauge inflated the composite print for a third straight month.
Under the hood, indices for new orders, production, employment, and new export orders rose, which isn’t saying much, really.
“Three months into the manufacturing disruption caused by the coronavirus pandemic, comments from the panel were cautious (two cautious comments for every one optimistic comment) regarding the near-term outlook”, the report reads. “As was the case in April, the PMI indicates a level of manufacturing-sector contraction not seen since April 2009 [but] the trajectory improved”.
ISM reminds you that, at 68, the supplier deliveries index “elevated” the headline gauge, even as it eased off April’s absurd 76 print.
Meanwhile, the final read on IHS Markit’s gauge for May was unchanged from the flash print at 39.8. “Although slightly higher than April’s recent low, the latest figure signaled the second-steepest deterioration in manufacturing operating conditions since April 2009”, the color accompanying the release reads.
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 and how things have shaped up since.
“With increasing numbers of companies restarting production, we should see some improvements in the output trend in coming months”, Chris Williamson, Chief Business Economist at IHS Markit, remarked on Monday, before delivering a bit of a reality check, followed immediately by a feeble attempt at a glass-half-full take.
“There remains a high risk that any recovery will be frustratingly slow as ongoing social distancing measures, high unemployment, job insecurity and damaged balance sheets constrain consumer and business spending”, Williamson went on to say, adding that “the recovery will of course also fade quickly if virus infections start to rise again [but] for now, we focus on the good news”.
Nobody tell Chris about the burning cities.
Via ISM
WHAT RESPONDENTS ARE SAYING
- “Despite the COVID-19 issues, we are seeing an increase of quoting activity. This has not turned into orders yet, but it is a positive sign.” (Computer & Electronic Products)
- “Current conditions in the automotive, construction, oil and gas, agriculture equipment, and tube/pipe markets are all adversely impacting our business results.” (Chemical Products)
- “We see an issue with suppliers that are affecting production. At the same time, social distancing measures in [the] manufacturing plant and customer demand are impacting the rate of production.” (Transportation Equipment)
- “Increased COVID-19 sales in the food business has really stressed our production capabilities.” (Food, Beverage & Tobacco Products)
- “Fuel sales demand are beginning to rebound in May as stay-at-home orders are lifted across the country.” (Petroleum & Coal Products)
- “Returning to full production for automotive, ramp-up will still depend on speed of automotive start-ups. We have built up inventory to stock. Ready to ship.” (Fabricated Metal Products)
- “Business activity remains strong for consumable applications and very weak in durable segments.” (Plastics & Rubber Products)
- “We have been fortunate that most of our customer base is considered to be a part of the critical workforce, so we have been running at around 80 percent of our normal production volume.” (Primary Metals)
- “Getting out from under several suppliers being closed worldwide. Also, looking at what really needs to be in China.” (Machinery)
- “We see a lot of positive signs, despite what’s going on. People seem to continue to be building and looking to projects for fall of 2020 and beyond. There is good optimism out there.” (Nonmetallic Mineral Products)
