The ISM Manufacturing Index is derived from a survey of purchasing managers and their outlook on overall conditions by looking at factors such as orders for durable goods, industrial production, and hiring. It gives a general direction rather than the specific strength of the factory sector and manufacturing activity in the U.S. A reading above 50 is an indicator that the manufacturing sector is growing while a reading below 50 indicates a contraction.
The March 2020 ISM Manufacturing report came in at a level of 49.1, depicting a 1% decrease since the February value of 50.1. The index was still much higher than the forecasted 45.0. The index has also decreased by 11.21% from last March. This is still 2.7% higher than September 2019’s reading of 47.8, which was the bottom of the recent manufacturing recession.
Manufacturing rebounded sharply in January, topping estimates, and signaling growth since the beginning of the manufacturing recession. The ISM Manufacturing report surged to 50.9 in January after hitting another almost 4-year low of 47.8 and signaled the first strong manufacturing expansion seen in the previous six months. However, there has been a slow continual dip between January and March, and the index is shifting downward. Prices, new orders, export orders, and employment each fell by -8.5%, -7.6%, -4.6%, and -3.1%, while supplier deliveries grew 7.7%. The ISM measure shows that, generally, the overall economy is still growing, but at a relatively slow rate, while the manufacturing sector is beginning to contract. It is easy to predict the ISM Manufacturing index will continue to fall as the effect of the Coronavirus outbreak becomes fully realized over April, and as the period of social distancing has been extended.
April 1, 2020