U.S ISM manufacturing PMI drops back into the contraction zone in March

U.S ISM manufacturing PMI drops back into the contraction zone in March

  • U.S ISM manufacturing PMI contracts to 49.1 in March versus 50.1 in February.
  • The decline in the manufacturing activity was attributed to the COVID-19 pandemic.
  • ISM says steep decline in production and new orders weighed heavily on the PMI.

The Institute for Supply Management (ISM) announced its monthly report on the U.S manufacturing purchasing managers’ index (PMI) on Wednesday. The data showed the activity in the manufacturing sector to have declined in March. The contraction, as per the ISM, was broadly attributed to the ongoing Coronavirus pandemic that has brought economic activity to a near halt.

Wednesday’s data revealed the ISM manufacturing PMI at 49.1 in March. In February, the index was recorded at a higher 50.1. Economists, on the other hand, had expected a much broader contraction to 44.9 in the U.S manufacturing PMI in March.

Decline In Production And New Orders Weighed On The PMI

ISM said that a steep decline in production and new orders contributed the most to March’s decline. According to chairman Timothy Fiore of ISM:

“The Coronavirus pandemic and shocks in global energy markets have impacted all manufacturing sectors.”

Having dropped below the neutral 50 mark, March’s reading represented contraction in the U.S manufacturing sector.

Losing 7.6 percentage points, the new order sub-index recorded at 42.2 this month from a higher 49.8 in February. The production sub-index, on the other hand, dropped from February’s 50.3 to 47.7 in March.

According to ISM’s data on Wednesday, the sub-index that covers backlog of orders registered at 45.9 in March after losing 4.4 percentage points from 50.3 last month. The employment sub-index posted at 43.8 this month as compared to 46.9 that was printed in February.

Other Prominent Figures In Wednesday’s Data

Other prominent figures in Wednesday’s data include supplier deliveries sub-index that improved to 65 in March versus 57.3 in February. The inventories sub-index also climbed slightly from February’s 46.5 to 46.9 in March. The prices sub-index saw a massive decline of 8.5 percentage points to 37.4 this month. At 46.6, the new export orders sub-index was 4.6 percentage points down while the imports sub-index decreased marginally from 42.6 last month to 42.1 in March.

The Coronavirus weighed heavily on the U.S manufacturing sector in March and has infected around 190,000 people and caused over 4,000 deaths so far.

The U.S dollar index is regaining strength on Wednesday. From a low of 99.01, the index climbed to 99.71 earlier today. At the time of writing, the U.S dollar index is stabilizing around 99.62.

Consequently, the EUR/USD currency pair lost traction in the forex market and dropped from a high of 1.1030 to 1.0915 level on Wednesday, close to which it is currently trading.

By Wajeeh Khan
Mr. Khan specialises in Public Health by academia but is a trader by passion. Taking up two new hobbies of writing and trading in his teen years, he is now a professional trader and news writer with over 5 years of experience in various financial markets. Khan is passionate about bringing insightful articles to his readers and hopes to add value to their portfolios.

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