ISM Manufacturing Index (PMI) Declines Far Less than Expected in March, Beating Forecasts

Tempe, Az. (PPD) — The Institute for Supply Management (ISM) Manufacturing Index (PMI) came in at 49.1 in March, a far less than expected decline that beat forecasts.

Forecasts ranged from a low of 40.0 to a high of 48.0. The consensus forecast was 44.0.

The New Orders Index came in at just 42.2%, a decline of 7.6 points from the February reading of 49.8%. The Production Index came in at 47.7%, down 2.6 from 50.3%.

The Backlog of Orders Index posted at 45.9%, a decline of 4.4 points from 50.3%. The Employment Index registered 43.8%, a decrease of 3.1 from 46.9%.

The Supplier Deliveries Index came in at 65%, up 7.7 points from 57.3%. While readings above 50% indicate slower deliveries typical of higher demand and an expanding economy, the reading in March was primarily the result of supply issues due to the Chinese Coronavirus (COVID-19).

Meanwhile, the Inventories Index registered at 46.9%, a slightly 0.4 percentage increase from 46.5%.

WHAT RESPONDENTS ARE SAYING

• “COVID-19 is impacting China’s raw material supply chain. We are now seeing revenue impact in that region. Our operations team is reviewing plans for spread of the virus.” (Computer & Electronic Products)
• “The two main issues affecting our business [are] COVID-19 and the oil-price war. We are in daily discussions and meeting constantly, updating tracking logs to document high risk concerns.” (Chemical Products)
• “COVID-19 impact has extended to Europe and North America. The virus escalation is affecting our purchasing and logistics operations. We have incurred air-shipment and production interruptions due to shortages of raw materials and components.” (Transportation Equipment)
• “We are experiencing a record number of orders due to COVID-19.” (Food, Beverage & Tobacco Products)
• “World demand for petroleum products is declining, while supply is ramping up. We have lost supply chain visibility to certain locations.” (Petroleum & Coal Products)
• “COVID-19’s spread in the U.S. may start impacting our domestic business. As for Asian suppliers, they are starting to get back up to speed.” (Fabricated Metal Products)
• “COVID-19 has caused a 30-percent reduction in productivity in our factory.” (Machinery)
• “A big part of our business is hospitality, and we are seeing demand drop and an increase in cancellations.” (Nonmetallic Mineral Products)
• “All North American manufacturing plants have ceased operations or drastically scaled back as a result of customer plant closings and other responses to COVID-19.” (Plastics & Rubber Products)
• “Volumes are down 4.3 percent, and some areas of the supply chain are being affected by the coronavirus.” (Furniture & Related Products)

Worth noting, the Purchasing Managers’ Manufacturing Index (PMI), an alternative gauge of national factory activity stressed by U.S. Trade Representative Peter Navarro over the ISM PMI, came in at 48.5.

Forecasts ranged from a low of 39.5 to a high of 49.2. The consensus forecast was 48.4. Markets watch ISM closer.