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PMI® at 49.1%; March 2020 Manufacturing ISM® Report On Business®Production, New Orders, and Employment Contracting; Supplier Deliveries Slowing at Faster Rate; Backlog Contracting; Raw Materials Inventories Contracting; Customers' Inventories Too Low; Prices Decreasing; Exports and Imports Contracting TEMPE, Ariz., April 1, 2020 /PRNewswire/ -- Economic activity in the manufacturing sector contracted in March, and the overall economy grew for the 131st consecutive month, 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 March PMI® registered 49.1 percent, down 1 percentage point from the February reading of 50.1 percent. The New Orders Index registered 42.2 percent, a decrease of 7.6 percentage points from the February reading of 49.8 percent. The Production Index registered 47.7 percent, down 2.6 percentage points compared to the February reading of 50.3 percent. The Backlog of Orders Index registered 45.9 percent, a decrease of 4.4 percentage points compared to the February reading of 50.3 percent. The Employment Index registered 43.8 percent, a decrease of 3.1 percentage points from the February reading of 46.9 percent. "The Supplier Deliveries Index registered 65 percent, up 7.7 percentage points from the February reading of 57.3 percent, and limited the decrease in the composite PMI®. The Supplier Deliveries Index is one of five equally weighted subindexes that directly factor into the PMI®, along with New Orders, Production, Employment and Inventories. Supplier Deliveries is the only ISM® Report On Business® index that is inversed — a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases. However, the high index reading in March was primarily a product of coronavirus-related supply problems. "The Inventories Index registered 46.9 percent, 0.4 percentage point higher than the February reading of 46.5 percent. The Prices Index registered 37.4 percent, down 8.5 percentage points compared to the February reading of 45.9 percent. The New Export Orders Index registered 46.6 percent, a decrease of 4.6 percentage points compared to the February reading of 51.2 percent. The Imports Index registered 42.1 percent, a 0.5-percentage point decrease from the February reading of 42.6 percent. "Comments from the panel were negative regarding the near-term outlook, with sentiment clearly impacted by the coronavirus (COVID-19) pandemic and energy market volatility. The PMI® returned to contraction territory, and with a negative trajectory. Demand slumped, with (1) the New Orders Index contracting at a strong level, in part pushed by new export order contraction, (2) the Customers' Inventories Index remaining at 'too low' status, but increasing at a level considered a negative for future production, (3) the Backlog of Orders Index contracting again, at a moderate rate. Consumption (measured by the Production and Employment indexes) contributed negatively (a combined 5.7-percentage point decrease) to the PMI® calculation, with activity contracting at a faster rate. Inputs — expressed as supplier deliveries, inventories and imports — strengthened in March, due primarily to supplier delivery difficulties; inventory contraction stabilized. Despite imports contracting at strong rates due primarily to coronavirus impacts, inputs contributed positively to the PMI® calculation. (The Imports Index does not directly factor into the PMI®.) Prices continued to contract (and at a faster rate in March), supporting a negative outlook. "The coronavirus pandemic and shocks in global energy markets have impacted all manufacturing sectors. Among the six big industry sectors, Food, Beverage & Tobacco Products remains strongest, followed by Chemical Products, which in addition to the pharmaceutical component, is a significant contributor to the Food, Beverage & Tobacco Products Industry and beneficiary of low energy and feedstock prices. Transportation Equipment and Petroleum & Coal Products are the weakest sectors. Sentiment regarding near-term growth this month is strongly negative, by a 2-to-1 ratio," says Fiore. Of the 18 manufacturing industries, the 10 that reported growth in March — listed in order — are: Printing & Related Support Activities; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Wood Products; Paper Products; Chemical Products; Computer & Electronic Products; Primary Metals; Miscellaneous Manufacturing; and Plastics & Rubber Products. The six industries reporting contraction in March, in order, are: Petroleum & Coal Products; Textile Mills; Transportation Equipment; Furniture & Related Products; Fabricated Metal Products; and Machinery. WHAT RESPONDENTS ARE SAYING
Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes. COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY Commodities Up in Price Commodities Down in Price Commodities in Short Supply Note: The number of consecutive months the commodity is listed is indicated after each item. MARCH 2020 MANUFACTURING INDEX SUMMARIES PMI® A PMI® above 42.8 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the March PMI® indicates growth for the 131st consecutive month in the overall economy, but a return to contraction by the manufacturing sector following two months of expansion. "The past relationship between the PMI® and the overall economy indicates that the PMI® for March (49.1 percent) corresponds to a 1.8-percent increase in real gross domestic product (GDP) on an annualized basis," says Fiore. THE LAST 12 MONTHS
New Orders Of the 18 manufacturing industries, nine reported growth in new orders in March, in the following order: Wood Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Paper Products; Chemical Products; and Computer & Electronic Products. The nine industries reporting a decline in new orders in March — in the following order — are: Petroleum & Coal Products; Transportation Equipment; Primary Metals; Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing; Fabricated Metal Products; and Machinery.
Production The seven industries reporting growth in production during the month of March — listed in order — are: Wood Products; Printing & Related Support Activities; Apparel, Leather & Allied Products; Primary Metals; Food, Beverage & Tobacco Products; Chemical Products; and Electrical Equipment, Appliances & Components. The five industries reporting a decrease in production in March are: Transportation Equipment; Textile Mills; Fabricated Metal Products; Computer & Electronic Products; and Machinery. Six industries reported no change in production in March compared to February.
Employment Of the 18 manufacturing industries, three reported employment growth in March: Printing & Related Support Activities; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The 13 industries reporting a decrease in employment in March, in the following order, are: Petroleum & Coal Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Transportation Equipment; Fabricated Metal Products; Plastics & Rubber Products; Primary Metals; Furniture & Related Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Chemical Products; and Machinery.
Supplier Deliveries† The 16 industries reporting slower supplier deliveries in March — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Transportation Equipment; Primary Metals; Computer & Electronic Products; Paper Products; Petroleum & Coal Products; Machinery; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing; and Electrical Equipment, Appliances & Components. No industry reported faster supplier deliveries in March.
Inventories The five industries reporting higher inventories in March are: Printing & Related Support Activities; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Primary Metals; and Chemical Products. The 11 industries reporting a decrease in inventories in March — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Wood Products; Textile Mills; Machinery; Plastics & Rubber Products; Transportation Equipment; Fabricated Metal Products; and Computer & Electronic Products.
Customers' Inventories† Of 18 industries, the only industry reporting higher customer inventories in March is Transportation Equipment. The 12 industries reporting customers' inventories as too low during March — listed in order — are: Apparel, Leather & Allied Products; Wood Products; Textile Mills; Paper Products; Chemical Products; Plastics & Rubber Products; Furniture & Related Products; Computer & Electronic Products; Fabricated Metal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Machinery.
Prices† The two industries reporting paying increased prices for raw materials in March are: Wood Products; and Computer & Electronic Products. The 15 industries reporting a decrease in prices for raw materials in March — listed in order — are: Petroleum & Coal Products; Primary Metals; Furniture & Related Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Chemical Products; Transportation Equipment; Paper Products; Fabricated Metal Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Machinery; and Miscellaneous Manufacturing.
Backlog of Orders† Six of the 18 industries reported growth in order backlogs in March, in the following order: Apparel, Leather & Allied Products; Wood Products; Paper Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; and Chemical Products. In March, eight industries reported lower backlogs, in the following order: Petroleum & Coal Products; Primary Metals; Plastics & Rubber Products; Transportation Equipment; Miscellaneous Manufacturing; Fabricated Metal Products; Machinery; and Computer & Electronic Products.
New Export Orders† The four industries reporting growth in new export orders in March are: Apparel, Leather & Allied Products; Paper Products; Chemical Products; and Miscellaneous Manufacturing. The six industries reporting a decrease in new export orders in March, in the following order, are: Transportation Equipment; Fabricated Metal Products; Machinery; Plastics & Rubber Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products. Seven industries reported no change in exports in March compared to February.
Imports† The four industries reporting growth in imports in March are: Wood Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; and Chemical Products. The 11 industries reporting a decrease in imports in March — in the following order — are: Paper Products; Apparel, Leather & Allied Products; Primary Metals; Petroleum & Coal Products; Transportation Equipment; Machinery; Furniture & Related Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; and Fabricated Metal Products.
†The Supplier Deliveries, Customers' Inventories, Prices, Backlog of Orders, New Export Orders and Imports indexes do not meet the accepted criteria for seasonal adjustments. Buying Policy
About This Report The data presented herein is obtained from a survey of manufacturing supply executives based on information they have collected within their respective organizations. ISM® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making. Data and Method of Presentation Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers' Inventories, Employment and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher, better and slower for Supplier Deliveries) and the negative economic direction (lower, worse and faster for Supplier Deliveries), and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive). The resulting single index number for those meeting the criteria for seasonal adjustments (PMI®, New Orders, Production, Employment and Inventories) is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-moveable holidays. All seasonal adjustment factors are subject annually to relatively minor changes when conditions warrant them. The PMI® is a composite index based on the diffusion indexes of five of the indexes with equal weights: New Orders (seasonally adjusted), Production (seasonally adjusted), Employment (seasonally adjusted), Supplier Deliveries (seasonally adjusted), and Inventories. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI® reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A PMI® above 42.8 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.8 percent, it is generally declining. The distance from 50 percent or 42.8 percent is indicative of the extent of the expansion or decline. With some of the indicators within this report, ISM® has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis. The Manufacturing ISM® Report On Business® survey is sent out to Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to report on information for the current month for U.S. operations only. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the first business day of the following month. The industries reporting growth, as indicated in the Manufacturing ISM® Report On Business® monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease. Responses to Buying Policy reflect the percent reporting the current month's lead time, the approximate weighted number of days ahead for which commitments are made for Capital Expenditures; Production Materials; and Maintenance, Repair and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern. ISM ROB Content Except as explicitly and expressly permitted by ISM, you are strictly prohibited from creating works or materials (including but not limited to tables, charts, data streams, time-series variables, fonts, icons, link buttons, wallpaper, desktop themes, online postcards, montages, mashups and similar videos, greeting cards, and unlicensed merchandise) that derive from or are based on the ISM ROB Content. 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