Dive Brief:

• The U.S. PMI contracted 7.6 percentage points from March to April, falling to 41.5%, the lowest indicator of manufacturing sector contraction since 2009, according to the Institute for Supply Management (ISM). A PMI reading above 50% indicates growth and below 50% indicates decline.
• In addition, ISM's New Orders Index posted a 15.1 percentage point decline to 27.1% — the index's lowest reading since 2008 and the single largest one-month drop recorded since 1951.
• The latter figure is particularly concerning as ongoing production delays domestically and in Mexico — a key trade and manufacturing partner for the U.S. — could take months to recover from, Timothy R. Fiore, chair of ISM's Manufacturing Business Survey Committee​, told Supply Chain Dive in an interview. He said he is watching Georgia, Tennessee and Texas closely as those states begin reopening to see whether ramping up manufacturing while preventing a resurgence of COVID-19 cases, is possible in the near term.

Dive Insight:

The April figure offers a more complete picture of the impact the COVID-19 pandemic has had on manufacturing and domestic supply chains, Fiore said. The March PMI, despite showing decline, had not yet captured the full impact of production slowdowns, labor disruptions and a significant drop in overall U.S. economic growth that began taking hold at the end of the month, he explained.

Food and beverage and paper product sectors were the only ones, out of the 18 manufacturing industries ISM tracks, that showed growth in April. Chemical products, transportation equipment, metal products, and petroleum and coal products were among the worst-performing sectors. This is largely due to a steep dropoff in non-military aerospace manufacturing in addition to a swift collapse in global oil prices, which has had negative ripple effects for a variety of other heavy manufacturing industries, Fiore said.

"I think we kind of can see where the bottom is," Fiore said of expected PMI contraction in May. "You can't get much worse than a 27 on a production index."

In China, the PMI fell to 50.8% in April, down from 52% in March, according to the National Bureau of Statistics of China. Production and shipping delays remain a concern for industries ISM surveyed.

"As the pandemic spreads quickly overseas, an acute contraction occurred to the global economy, which adds to the challenge facing China’s trade," according to a statement from the bureau obtained by Bloomberg. "Some manufacturing companies said newly signed export contracts have dropped sharply, and some existing orders were canceled."

In the coming weeks, as certain U.S. states explore reopening sectors of the economy, Fiore said many production facilities will start out at 25% capacity, hoping to reach 35% by mid-June.

However, the potential for a rebound in coronavirus cases could disrupt those efforts, as protests among Amazon warehouse workers and the United Auto Workers concerned about maintaining adequate safety measures, and multiple COVID-19 outbreaks in meat processing facilities, have recently highlighted.

"If we all go back out, we are subject to seeing another spike," Fiore said, and "the country really cannot afford another three months of non economic activity," if a repeated uptick in infections forces more stringent lockdowns in the future.