US manufacturers suffered the biggest fall in new orders for 11 years in March as coronavirus dented demand, although the overall sector shrunk by less than expected, according to a closely watched survey.
The ISM purchasing managers’ index (PMI) fell to a score of 49.1 in March, down from 50.1 in February. A score below 50 indicates contraction. Analysts had predicted a reading of 45.
Timothy Fiore, chair of ISM, the Institute of Supply Management, said: “Comments from the panel were negative regarding the near-term outlook, with sentiment clearly impacted by the coronavirus pandemic.”
He added that plummeting oil prices – which earlier this week hit 18-year lows – had also shaken the sector: “The coronavirus pandemic and shocks in global energy markets have impacted all manufacturing sectors.”
The gauge did not fall by as much as expected because supplier delivery times grew significantly. In normal times this would reflect increased demand, and thus pushes up the index. However, in March it indicated supply shortages.
Separate data paints a bleaker picture
A separate PMI reading from data firm IHS Markit showed that US factory activity was at its weakest since 2009. That was the year the world was in a deep recession following the financial crisis.
IHS Markit’s index fell to 48.5 in March from 50.7 in February. Chris Williamson, chief business economist at IHS Markit, said: “Growing numbers of company closures and lockdowns as the nation fights the Covid-19 outbreak mean business levels have collapsed.”
ISM’s survey data, which is the more closely watched, showed the new orders index fell to a reading of 42.2 in March, the lowest since March 2009, from 49.8 in February.
The survey also showed unemployment jumping. ISM’s factory employment index slid to a reading of 43.8 last month, the lowest since May 2009, from 46.9 a month earlier.
The US has already suffered a surge in unemployment. In the week to 21 March, claims for jobless benefits surged to 3.3m, by far the highest on record.