U.S. fac­to­ries shrink out­put in May, the 3rd month in a row

Richmond Times-Dispatch - - BUSINESS - BY PAUL WISE­MAN

Amer­i­can fac­to­ries slowed for the third con­sec­u­tive month in May as they con­tin­ued to sus­tain eco­nomic dam­age from the coron­avirus pan­demic.

The In­sti­tute for Sup­ply Man­age­ment, an as­so­ci­a­tion of pur­chas­ing man­agers, said Mon­day that its man­u­fac­tur­ing in­dex came in at 43.1 last month after regis­ter­ing 41.5 in April. Any­thing below 50 sig­nals that U.S. man­u­fac­tur­ers are in re­treat. New or­ders, pro­duc­tion, hir­ing and new ex­port or­ders all fell in May but at a slower pace than they did in April.

The pan­demic and the lock­downs, and travel re­stric­tions meant to com­bat it, have brought eco­nomic ac­tiv­ity to a near-stand­still. U.S. gross do­mes­tic prod­uct fell at a 5% an­nual rate from Jan­uary-March and is ex­pected to drop at a record-bust­ing 40% rate from April-June.

The re­sults were about what econ­o­mists ex­pected.

Eleven of 18 man­u­fac­tur­ing in­dus­tries con­tracted last month, led by print­ing, pri­mary met­als and trans­porta­tion equip­ment mak­ers. Six re­ported growth, led my min­eral com­pa­nies and fur­ni­ture mak­ers.

The Com­merce Depart­ment said last week that or­ders for big-ticket man­u­fac­tured goods dropped 17.2% in April after fall­ing 16.6% in March.

“Look­ing ahead, con­di­tions may start to grad­u­ally im­prove in June but man­u­fac­tur­ing faces sig­nif­i­cant tra­vails on the long road to re­cov­ery,” econ­o­mists Oren Klachkin and Gre­gory Daco of Ox­ford Eco­nom­ics wrote in a re­search re­port. Among the prob­lems fac­to­ries face are weak de­mand, dis­rup­tions in sup­plies and height­ened un­cer­tainty.

“These im­ped­i­ments, along with fears of a sec­ond wave of coron­avirus con­ta­gion, are ex­pected to per­sist even once lock­downs are fully lifted, mak­ing a V-shaped re­cov­ery very un­likely,’’ Klachkin and Daco wrote.

The pain is not lim­ited to the United States. J.P. Mor­gan re­ported Mon­day that global man­u­fac­tur­ing pro­duc­tion fell for the fourth straight month in May. Man­u­fac­tur­ing out­put fell in 27 of the 28 coun­tries for which re­sults were avail­able. The ex­cep­tion was China, where the virus orig­i­nated and where the first eco­nomic re­cov­ery be­gan after a dra­co­nian lock­down.

Man­u­fac­tur­ing was al­ready hurt­ing be­fore the out­break brought the econ­omy to a near-stand­still in March. The ISM man­u­fac­tur­ing in­dex has sig­naled con­trac­tion in eight of the last 10 months. Pres­i­dent Don­ald Trump’s trade war with China had raised costs and cre­ated un­cer­tainty that par­a­lyzed in­vest­ment de­ci­sions, and the world econ­omy had been los­ing mo­men­tum.

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