Following the utter devastation across all regional Fed surveys, it should be no surprise that this morning's national manufacturing surveys (ISM and Markit) are a disaster.
Markit US Manufacturing 36.1 - 11-year low (weaker than expected and worse than the flash print)
PMI US Manufacturing 41.5 - 11 year lows (but better than the 36.0 expected due to the farcical surge in supplier delivery times)
April data signaled an unprecedented contraction in production across the U.S. manufacturing sector, overwhelmingly linked to measures implemented to contain the COVID-19 outbreak. Factory closures were widely reported and the frequent cancellation or postponement of orders resulted in the largest monthly drop in the new orders index on record. Spare capacity across the sector and pessimism about the year ahead meanwhile resulted in the fastest fall in employment since March 2009, despite efforts to furlough staff. Both input costs and output charges fell sharply as companies and their suppliers offered discounts to boost sales.
The headline reading was the lowest for just over eleven years...
Which confirms the collapse in regional Fed surveys...
New orders, employment and inventories fall at steepest rates since the global financial crisis and worse still, output expectations turn negative for first time in the series history.
ISM Manufacturing Employment crashed to a record low...
Of course, the PMI data continues to suffer from the farcical misinterpretation of a spike in supplier delivery times as a 'positive' thing - as opposed to being a terrible negative due to the global breakdown in supply chains caused by the pandemic and its concommitant economic lockdowns. A record collapse in new orders (and employment) and record surge in supplier delivery times.
What's wrong with that picture?
Chris Williamson, Chief Business Economist at IHS Markit said:
"April saw the manufacturing sector struck hard by the COVID-19 pandemic, with output falling to an extent surpassing that seen even at the height of the global financial crisis. With orders collapsing at a rate not seen for over a decade, supply chains disrupted to a record degree and pessimism about the outlook hitting a new survey high, rising numbers of firms are culling payroll numbers.
“Consumer facing businesses are being hit by slumping demand from households as April saw widespread lockdowns, but business spending on inputs and equipment has also tumbled as companies slash production and investment.
“Smaller firms are being hit the hardest, and also reporting the highest job losses, but large firms are also seeing the sharpest downturn on record.
And as for hope, it's not about to get any better...
As Williamson concluded, “with infection curves showing signs of flattening, it is naturally hoped that the economic downturn will also bottom-out. As restrictions are lifted, demand should gradually revive, but the trade-off between risking a second wave of infections and bringing the economy back to life looks set to be one of the greatest challenges faced by policy- and lawmakers in recent history. The process will inevitably be led by caution, meaning recovery will also be frustrating slow."