U.S private firms post sharp contractions in manufacturing & services sectors in March

U.S private firms post sharp contractions in manufacturing & services sectors in March
Written by:
Wajeeh Khan
March 24, 2020
  • IHS Markit records the U.S flash manufacturing PMI at 49.2 in March versus 50.7 in February.
  • IHS Markit records the U.S flash services PMI at 39.1 in March versus 49.4 in February.
  • Economists expect the U.S dollar index to challenge the 105.0 level amidst the Coronavirus crisis.

IHS Markit announced its monthly report on U.S manufacturing and services purchasing managers’ index (PMI) for March on Tuesday. The data showed the private firms in the United States to have seen a massive contraction in business activity this month due to the ongoing Coronavirus crisis. The widespread decline in both the manufacturing and services sectors was branded the sharpest since record-keeping began in 2009.

The broader index that measures the combined output from the private sector manufacturing and services dropped to 40.5 in March as compared to a significantly higher 49.6 that was recorded in February, according to Markit’s data on Tuesday. The U.S flash manufacturing output index, on the other hand, posted at 47.6 this month versus last month’s 50.7 and marked a 127-month low.

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U.S Services Sector Took The Greatest Hit In March

In terms of business activity, the services sector in the United States took the greatest hit in March due to the health emergency. The U.S flash services PMI dropped deeper into the contraction zone to record at 39.1 in March. In February, the index was capped at 49.4 instead. Economists had anticipated a much narrower contraction in the U.S services sector in March to 44.1.

Lastly, the U.S flash manufacturing PMI was the most resilient in March despite still having dropped slightly into the contraction zone. In February, the flash manufacturing PMI was registered at 50.7. In March, as per Markit’s data on Tuesday, the index declined slightly to 49.2. The reading, however, still marked a 127-month low for the U.S flash manufacturing PMI. Economists had anticipated a much wider contraction in this index to 45.1 in March.

Response In The Forex Market

In separate news, the Federal Reserve Bank of Richmond’s manufacturing index came out in the green zone on Tuesday despite the ongoing virus situation. The index recorded at 2 in March up from February’s -2. Economists had expected the index to print at -10 in March.

The forex market responded fairly aggressively to the economic data on Tuesday. Eur/Usd lost traction following the release of the PMIs report and dropped from 1.0850 to 1.0770. The U.S dollar index is currently just below the 102.0 level.

According to some economists, the U.S dollar index may challenge the 105.0 level amidst the ongoing Coronavirus emergency. The next move in the U.S dollar index is expected later on Tuesday as the U.S President, Donald Trump, addresses the nation.