Lede

The Institute for Supply Management (ISM) survey revealed that U.S. manufacturing activity had fallen to its lowest level in almost three years, raising concerns of a forthcoming recession.

Summary

• All sub-components of the ISM's manufacturing Purchasing Managers Index (PMI) were under the 50-point threshold for the first time since 2009, a sign of a contraction in manufacturing.
• Economists predict that the performance of the service sector, which has remained consistent with a growing economy, will affect the general health of the economy.
• Reports indicate that manufacturing expanded at a 4.5% annualized rate in Q4 2022; however, recent data suggests a moderate decline.
• The new order sub-index fell from 47.0 to 44.3 last month, indicating that demand could reduce following the closure of two regional banks and the tightening of lending standards.
• Work backlogs shrank due to reduced demand, while the measure of supplier deliveries dropped to 44.8, the lowest level since March 2009.
• Comments from manufacturers reveal downbeat projections, with many reporting a slowdown in sales and new orders.
• Only petroleum, coal products, machinery, printing, related support activities, miscellaneous manufacturing, fabricated metal products, and primary metals registered growth in March.
• The proportion of manufacturing gross domestic product with a composite PMI calculation at or below 45%, a good barometer of overall manufacturing sluggishness, was 25% in March, compared to 10% in February.
• While economic statistics in the rest of the economy have not shown convincing signs of a recession, 70% of manufacturing gross domestic product was contracting in March, with more industries contracting strongly than the previous month.
• Prices paid by manufacturers dropped to 49.2 from 51.3 in February, indicating inflation at the factory gate is retreating.
• Tighter credit conditions caused by Federal Reserve rate hikes to fight inflation have raised borrowing costs and cooled demand for goods.
• Oil prices increased after Saudi Arabia and other OPEC+ oil producers announced further oil output cuts of around 1.16 million barrels per day, and prices for services remain high.