The top-line ISM Manufacturing Index declined to 41.5 from 49.1, confirming that the economy sank into recession in March. The forward-looking new orders component declined to 27.1 from 42.2 and the employment sub-index collapsed to 27.5 from 43.8.
Ten of the 11 components in the survey all point to a severe downturn in the manufacturing complex.
The production sub-index declined to 27.5 from 47.7, reflecting the nature of the magnitude of shock that the manufacturing sector is absorbing. Ten of the 11 components all point to a severe downturn in the manufacturing complex that will most likely persist until later this year.
Given the limited restart to production in some areas of the manufacturing complex, the May reading will most likely be the low in the series during the current recession. We would anticipate that sentiment surveys will show contraction at a slower pace until the public is convinced that it is safe to resume normal social and professional activities.
One cannot overstate how critical it is that the federal and state governments move to put in place a rigorous testing regimen that will boost confidence and facilitate a resumption of social and commercial activity, which bolsters the domestic economy.
The risk around that forecast is that the public grows impatient with shelter-in-place orders, and a second round of infections, mortality and economic shutdowns occurs later this year.
Here is a look at what survey participants are saying:
- “Thirty-percent decrease for April due to COVID-19 impact on both customers and suppliers.” (Computer and electronic products)
- “Production stopped, other than to make hand sanitizer for those in need.” (Chemical products)
- “COVID-19 has created a wave of activities, including vendors closing, vendors focusing only on the medical industry, employees not coming to work, delayed shipments from overseas.” (Transportation equipment)
- “The food processing B2B space remains steady. We are weathering the storm. There is a fortunate increased need for packaged foods. Softening is showing through in some products that find their way into food service and lodging.” (Food, beverage and tobacco products)
- “Our refinery is losing money making gasoline due to the falling demand.” (Petroleum and coal products)
- “We supply the construction industry in various ways, where the slowdown has been a bit slower than most industries. It is, however; beginning to impact our business, and we see more challenges on the horizon.” (Fabricated metal products)
- “The company I work for manufactures personal protective equipment [PPE], specifically N95 masks, face shields, as well as selling protective clothing and hand protection. In the area of PPE, our backlog has spiked to numbers we have never seen. While no doubt some of the back orders will be canceled, many of the orders are longer-term commitments from [the] U.S. government.” (Apparel, leather and allied products)
- “Our packaging business is starting to see signs of a slowdown in May after two strong months into COVID-19.” (Paper products)
- “COVID-19 has destroyed our market and our company. Without a full recovery very soon, and some assistance, I fear for our ability to continue operations.” (Nonmetallic mineral products)
- “Dealing with the effects of coronavirus and having 65% of our operations down.” (Furniture and related products)
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.