Last updateTue, 26 May 2020 7pm

U.S. Manufacturing Decline May Have Peaked in April

Manufacturers registered a further substantial deterioration in operating conditions midway through the second quarter, as the IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index posted 39.8 in May, up from 36.1 at the start of the second quarter.

Driving the deterioration were significant contractions in production and new orders, as businesses slowly returned to work amid challenging domestic and foreign demand conditions. The rates of reduction were among the most marked since the depths of the financial crisis.

Manufacturers were still concerned as to the purchasing power of their clients following the pandemic, with many continuing to reduce their output charges in the hope of boosting sales amid a second monthly decline in input costs.

Small Business Optimism Continues Two Month Slide

Small business optimism took another dive in April, falling 5.5 points to 90.9, with owners expressing certainty the economy will weaken in the near-term, but expecting it to improve over the next six months. The NFIB Small Business Optimism Index has fallen 13.6 points over the last two months, with nine of 10 Index components declining in April and one improving.

“The impact from this pandemic, including government stay-at-home orders and mandated non-essential business closures has had a devasting impact on the small business economy,” said NFIB chief economist William Dunkelberg. “Owners are starting to benefit from the PPP and EIDL small business loan programs as they try to reopen and keep employees on staff. Small business owners need more flexibility, though, in using the PPP loan to support business operations and liability protection so that all these efforts to support small businesses are not ultimately lost in costly litigation.”

Global Manufacturing PMI Down Big in April

The J.P.Morgan Global Manufacturing PMI fell to 39.8 in April, its lowest level since March 2009. The economic disruption resulting from the outbreak of COVID-19 continued to hit global industry hard during April. Rates of contraction in output and new orders were among the steepest registered in the 22-year survey history and the worst since the global financial crisis of 2008/09. Business confidence took a severe knock, falling to a fresh record-low. The cyclically-sensitive new orders-to-inventory ratio also fell to its lowest ever level.

Dodge Momentum Index Trips on COVID-19 in April

The Dodge Momentum Index moved 6.0% lower in April to 135.9 from the revised March reading of 144.5. The Momentum Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. Both components of the Momentum Index pulled back during the month – the commercial component fell 7.6%, while the institutional component dropped 3.2%. The stage is set for an even weaker reading when the May data is released in June. 

U.S. Factory Orders Down 10.3% in March

New orders for manufactured goods in March, down four of the last five months, decreased a record $51.0 billion or 10.3% to $445.8 billion, the U.S. Department of Commerce reported.

New orders for manufactured durable goods in March, down following three consecutive monthly increases, decreased $36.6 billion, or 14.7%, to $212.6 billion. This followed a 1.1% February increase.

Shipments of manufactured durable goods in March, down eight of the last nine months, decreased $11.8 billion or 4.7% to $240.4 billion. This followed a 0.8% February increase. 

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