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Manufacturing Shrinks from COVID-19

Manufacturing Shrinks from COVID-19

Data and field reports for the major manufacturing indexes confirm a growing contraction. But there is at least one exception.

If you want to know what is going on in the global manufacturing sector, you need to understand the Purchasing Managers’ Indexes (PMI). These indexes are economic indicators derived from monthly surveys of private sector companies.

The three main creators of PMIs are:

  • The Institute for Supply Management (ISM): Focuses on U.S. manufacturing and non-manufacturing metrics.
  • The Singapore Institute of Purchasing and Materials Management (SIPMM):  Focuses on Singapore metrics.
  • The Markit Group: Produces metrics based on ISM's work for over 30 countries worldwide.

For now, let’s focus on the ISM’s PMI for the U.S. manufacturing market. According to the nation’s supply executives in the latest “Manufacturing ISM Report on Business,” economic activity in the manufacturing sector contracted in March, while the overall economy grew for the 131st consecutive month.

The March PMI registered 49.1 percent, down 1 percentage point from the February reading of 50.1 percent. Any number less than 50 is considered a contracting or shrinking manufacturing market. Several component indexes were down including those for new orders, production, backlog of orders and the employment index.

Comments from the panel related to the report were negative regarding the near-term outlook, “with sentiment clearly impacted by the coronavirus (COVID-19) pandemic and energy market volatility.” The PMI now has a negative trajectory as demand slumps with new orders contracting, and consumption decreases as measured by production and employment.

Interestingly, the “inputs” component of the indexes – as measured by supplier deliveries, inventories and imports – improved in March. But this was due mainly to difficulties that suppliers faced in delivering goods to their customers, due to COVID-19 shutdowns and transportation challenges. As an example of the latter, nearly 60% of air freight is carried in cargo holds of passenger aircraft, most of which have been shut down due to the crisis.

The infographic below captures what leading respondents in the major index categories had to say about their experiences in the market.

John Blyler is a Design News senior editor, covering the electronics and advanced manufacturing spaces. With a BS in Engineering Physics and an MS in Electrical Engineering, he has years of hardware-software-network systems experience as an editor and engineer within the advanced manufacturing, IoT and semiconductor industries. John has co-authored books related to system engineering and electronics for IEEE, Wiley, and Elsevier.

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