The Institute for Supply Management manufacturing index was released on Friday, and the numbers were about as bad as you might expect.
The manufacturing index is a monthly survey of manufacturing activity. It weighs new orders, production, employment, inventories, and supplier deliveries at over 300 manufacturing firms. The survey is considered an early indicator of economic trends. When the index rises above 50, that indicates that manufacturing activity is expanding, while a number below 50 suggests a contraction.
The most recent numbers showed a drop from 49.1 in March to 41.5 in April – the lowest level the index has seen since April 2009. The new orders index, production, and employment all saw double digit losses. New orders contracted by 15.1% to 27.1. Production declined by 20.2 percentage points to 27.5. The employment index slumped to 27.5, likely somewhat picking up the effects of 30 million Americans losing their jobs.
Analysts predicted a fall to 35, and the actual number was considerably better. This is likely to be cold comfort to those who work in the manufacturing industry, however. The Institute for Supply Management tracks eighteen different industries. In April, the only ones that grew were food and paper products (hello, toilet paper hoarding!). Transportation equipment, metal products, petroleum, coal, and chemicals all bombed. Manufacturers felt the impact of the oil glut, choked off supply chains, and the steep decline in demand.
The Institute for Supply Management reports that for every positive survey comment, there were three negative comments. According to a statement released by the ISM, ‘The [Index] indicates a level of manufacturing-sector contraction not seen since April 2009, with a strongly negative trajectory.’