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US Manufacturing Nearly Stagnates With Virus Hitting Suppliers

US Manufacturing Nearly Stagnates With Virus Hitting Suppliers

March 3, 2020
Concerns about current and ongoing reliable Asian supply dominated the concerns of respondents to ISM survey.

A key gauge of U.S. manufacturing retreated to near-stagnation in February amid mounting concern that the world’s largest economy won’t be able to dodge a hit from the coronavirus.

The Institute for Supply Management index slid to 50.1 from 50.9 a month earlier, according to data on March 2 that showed a steeper drop than economists surveyed by Bloomberg projected. Three of five components fell, led by the biggest drop in production since 2018. Of 18 industries, 14 reported growth, ISM said in a statement.

Global supply chains are impacting most, if not all, of the manufacturing industry sectors,” Timothy Fiore, chair of the ISM’s manufacturing survey committee, said in the statement. “Concerns about current and ongoing reliable Asian supply dominated the comments from panelists,” with a number mentioning the virus impact.

One respondent was quoted as saying the coronavirus “is wreaking havoc on the electronics industry.”

The factory gauge clinging just above 50, the dividing line between expansion and contraction, follows January’s surprisingly strong rebound that snapped a five-month string of shrinking activity. Coronavirus concerns flaring around the globe will test just how durable that figure can be amid supply-chain disruptions and weaker production.

Other purchasing managers’ indexes for manufacturing in Asia took a tumble with a severe contraction in activity in China driving down output across the region.

The ISM data showed that declines in the components tracking U.S. production, new orders and inventories were somewhat offset by the employment measure hitting a four-month high.

The gauge of supplier deliveries also rose to the highest level since 2018 -- indicating slower delivery times that may be due to supply disruptions from the coronavirus. The imports index swung into contraction, falling the most on record to 42.6, the lowest reading since 2009. Export orders grew at a slower pace.

Another U.S. factory gauge, produced by IHS Markit, fell to the lowest since August. The final measure for February dropped to 50.7 from 51.9 a month earlier.

By Jeff Kearns

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