Monday 1 June 2020 3:12 pm

US manufacturing remained in 'deep downturn' in May

Manufacturing output in the US continued to contract in May, as client demand weakened further and a negative outlook drove employment down.

US factories saw output slump to 39.8 in May, according to IHS Markit’s Purchasing Managers’ Index (PMI) data. Anything below 50 represents a contraction.

Read more: UK manufacturing downturn continues despite signs of life

The figure is up marginally from 36.1 in April, which represented the lowest reading in 11 years, driven by the steepest decline in output on record. Although a slight improvement on April’s figures, the latest figure signalled the second-steepest deterioration in conditions since April 2009.

The fall in output was largely driven by a further weakening in demand and lower new order inflows from both domestic and foreign customers amid the pandemic. IHS Markit also said a negative sentiment towards the outlook for output over the coming year drove employment down.

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The outbreak of Covid-19 has triggered a severe decline in production across the US production sector. The fall in the PMI figure is in part due to lower sales, but temporary shutdowns and difficulties operating within the new social distancing guidelines have also contributed to the slump.

Despite efforts to reduce working hours and furloughing some staff, US manufacturing firms cut numbers at the second-quickest rate in over 11 years. US unemployment has now hit a staggering 40m, with cities dealing with some of the highest unemployment rates since the 1920s.

Read more: Eurozone manufacturing shows tentative signs of recovery in May

Chris Williamson, chief business economist at IHS Markit said: “Manufacturing remained in a deep downturn in May, as measures taken to contain the spread of COVID-19 continued to cause production losses, disrupt supply chains and hit demand.”

“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. The recovery will of course also fade quickly if virus infections start to rise again.
For now, however, we focus on the good news that we may be past the worst in terms of the economic decline.”

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