Respondents were “negative regarding the near-term outlook, with sentiment clearly impacted by the coronavirus (COVID-19) pandemic and energy market volatility,” said Timothy Fiore, chair of the ISM’s Manufacturing Business Survey Committee. “The coronavirus pandemic and shocks in global energy markets have impacted all manufacturing sectors.”
The death toll in the US from the respiratory disease caused by the novel coronavirus that emerged in China late last year is nearly 4,100 with almost 189,800 infections, according to data compiled by Johns Hopkins University. To curb the spread of COVID-19, state and local officials have implemented shutdowns of large sectors of the economy since the middle of March.
The White House has said the US could see between 100,000 and 200,000 deaths, but a slide during a press briefing on Tuesday put the range to as high as 240,000.
Meanwhile, oil prices have plummeted in recent as the effects of lower demand due to the pandemic have been compounded by a price war between Saudi Arabia and Russia. West Texas Intermediate was down 1.9% Wednesday to $20.09 a barrel while international benchmark Brent dropped 5.5% to $24.90.
The ISM said its new-orders index fell 7.6 percentage points to 42.2% in March, and production was 47.7%, down 2.6 percentage points. The backlog of orders fell to 45.9% from 50.3% previously, and employment fell 3.1 percentage points to 43.8%.
“Many states only issued lockdown measures in mid to late March,” said TD Economics Senior Economist Sri Thanabalasingam “As a result, some of the corresponding drop off in production may not have been captured in today’s release. April’s reading will show the full extent of the coronavirus impact on American manufacturing.
Separately, IHS Markit’s manufacturing measure fell last month to 48.5 from 50.7 in February, its fastest fall since August 2009, according to the firm. The final reading for March was down from its mid-month flash reading of 49.2. The consensus on Econoday was for 48.4.
“Growing numbers of company closures and lockdowns as the nation fights the COVID-19 outbreak mean business levels have collapsed,” said IHS Chief Business Economist Chris Williamson. “While some producers reported being busier as a result of stockpiling and anti-virus activities, notably in the food and healthcare sectors, these are very much the minority, and most sectors reported a rapid deterioration in demand and production.”
IHS said new orders dropped at their fastest rate since June 2009 due to slumping demand because of COVID-10, and firms reported a “solid downturn in new export orders.”
Manufacturers cut their headcount by the sharpest pace since October 2009, IHS said, adding that the companies cited “redundancies” and the need to lower their operating capacities.