Northwest Arkansas Democrat-Gazette
Factory output falls off in April
Gauge shows fastest drop since ‘48; manufacturing jobs hurt
A measure of U.S. factory output shrank in April at the fastest pace in records back to 1948, prompting a sharp reduction in manufacturing employment as the coronavirus tightened its grip on the economy.
Data from the Institute for Supply Management on Friday showed its measure of factory production plummeted more than 20 points to 27.5, while its employment index also slid to 27.5, the weakest in almost 71 years. Readings below 50 indicate shrinking activity and the latest figures indicate an economy that’s rapidly deteriorated into recession.
The institute’s headline manufacturing measure fell less than forecast — a moremoderate 7.6 point decline to an 11-year low of 41.5 — supported by a further increase in delivery times. While longer lead times often can indicate elevated demand, the highest supplier deliveries index since 1974 reflects virusrelated disruptions in supply lines and business closures.
The median forecast in a Bloomberg survey of economists called for a decline to 36 in the overall factory index.
The news was bad almost across the board: Production, new orders, hiring and export orders all fell faster in April than they did in March. Just two industries — paper products and food — out of 18 reported growth in April, the fewest in 11 years.
“I think there’s been some fundamental damage here to some of the industry sectors and it’s going to take a while to rebuild,” Timothy Fiore, chairman of the institute’s manufacturing survey committee, said on a call with reporters. “Factory output is going to be subdued for quite some time.”
The supply managers group’s index of new orders also weakened substantially last month. The measure fell 15.1 points, the most since 1951, to 27.1. The gauge of manufacturers’ inventories, the final component used to calculate the institute’s overU.S.
all index, showed stockpiles declined at a slightly slower pace.
Fiore said 59% of industry comments about labor were related to workforce reduction, and of those, nearly half were about layoffs.
The institute’s export orders gauge dropped to the second-lowest level on record, underscoring weaker trade and collapsing worldwide economies.
The gauge of prices edged down to a more than fouryear low on weaker demand for commodities, including crude oil. Disinfectants and personal protective equipment were among goods that were up in price.
“The underlying details indicate a severe downshift in activity as production and employment contracted at a record pace,” economists Oren Klachkin and Gregory Daco of Oxford Economics wrote in a research report. “New orders signal that activity is unlikely to improve in the near term.”
Manufacturing was already hurting before the outbreak brought the economy to a near-standstill in March. The Institute for Supply Management’s manufacturing index has fallen seven of the past nine months. President Donald Trump’s trade war with China had raised costs and created uncertainty that paralyzed investment decisions.
The U.S. economy has slid into recession: Gross domestic product — the broadest measure of economic output — fell at a 4.8% annual pace from January-March, worst since the recession year 2008, even though the United States only began to go into a lockdown in mid-March. The April-June quarter is expected to be by far the worst in Commerce Department records dating to 1947. Information for this article was contributed by Vince Golle of Bloomberg News and by Paul Wiseman of The Associated Press.