U.S. manufacturing contracts further in April: IHS Markit

(C) Reuters. FILE PHOTO: The global outbreak of coronavirus disease (COVID-19) in Los Angeles

WASHINGTON (Reuters) – The U.S. manufacturing sector’s contraction accelerated in April, with activity sinking to an 11-year low as strict measures to slow the spread of the novel coronavirus weighed on demand and fractured supply chains, a survey confirmed on Friday.

Data firm IHS Markit (NYSE:INFO) said its final U.S. manufacturing Purchasing Managers’ Index dropped to a reading of 36.1 last month, the lowest reading since March 2009. That was a downward revision from the ‘flash’ figure of 36.9 reported last week and lower than 48.5 published in March.

A PMI reading below 50 indicates contraction in the manufacturing sector, which accounts for 11% of economic activity. IHS Markit said the deterioration in factory activity was “overwhelmingly” linked to lockdowns by state and local authorities to control the spread of COVID-19, the respiratory illness caused by the coronavirus.

The survey’s measure of new orders received by factories tumbled in April at its fastest rate since January 2009. The data firm said there were reports of customers canceling or postponing orders. New export orders also tumbled in April.

Manufacturers cut their workforce numbers at the sharpest pace since March 2009. Many manufacturers reported furloughing workers. Others said it was no longer viable to retain staff.

According to IHS Markit uncertainty and fear surrounding the longevity of the social distancing measures had led to business confidence slumping to a series low in April.

It said manufacturers were pessimistic regarding the outlook for output over the coming year on average for the first time since the data firm started tracking responses in July 2012.