Dive Brief:

• The U.S. PMI fell to 49% in March, down from 50% in February, due to disruptions from the COVID-19 outbreak, according to the Institute for Supply Management's (ISM) report Wednesday. A PMI reading above 50 indicates growth and less than 50 shows contraction.
• In China, as some factories come back online, the country's March PMI came in at 52%, up from nearly 36% in February, according to the National Bureau of Statistics of China. While this could benefit U.S. businesses needing to restock dwindling inventories, falling consumer demand in the U.S. and Europe has led ISM to predict the worst could be yet to come for domestic manufacturing and transport.
• "The big question is, how long will it really take to get back to a decent level of growth?" Timothy Fiore, chair of ISM's Manufacturing Business Survey Committee, told Supply Chain Dive in an interview." You're probably looking at two to three months to ramp back up to some decent levels once we get beyond [the pandemic], and I think most people are thinking it is going to carry through May."

Dive Insight:

The U.S. PMI's decrease comes amid a number of factory shutdowns and delayed re-openings due to coronavirus-related disruptions to supply lines, social-distancing requirements and demand shifts.

"It's really hard on factories, having to separate people six feet apart. In some cases, it's very difficult to do," Fiore said. In addition, "a general nervousness of the workforce is probably on the verge of causing increased absenteeism and the inefficiencies that go with that."

While China has been the first country to ramp back up, its PMI rebound doesn't tell the whole story, according to Fiore. "Coming back to 52 is encouraging, but it's not very strong," he sad. "A strong expansion for the month of March would have been 68 or 60. So, I think it kind of reflects the fact that they're coming back up [but] in some regions of China, they're coming up faster than others."

This has impacted U.S. manufacturers, a third of whom responded to ISM's survey saying they were still struggling to get supplies.

"Getting product out of China now is still difficult," Fiore said, "and that will improve over time, assuming that they're not relying on U.S. imports to manufacture stuff."

U.S. electronics manufacturers that import parts from China to build semiconductors, and then ship the components back to China for final assembly, are experiencing this impact, he said. Due to existing challenges from the U.S.-China trade war and the current economic slowdown, Fiore predicts industries relying on trade partners like this could face headwinds going forward.

For the industries that performed well in ISM's report — namely food and beverage and the chemical industry — increased demand for groceries and pharmaceuticals helped to keep orders moving. However, on the whole, ISM's measure of new orders fell to 42.2% in March, a decrease of 7.6 percentage points from February. This will have a knock-on effect for the transportation sector as depressed demand, reduced workforce capacity due to illness or social-distancing measures and other factors are going to slow the flow of goods over April and potentially into May, Fiore said.

Moving forward, Fiore said its important to look at the chain of events leading up to the current slow-down in the U.S.

"China was the first one to be down and is now the first one to be up," he said. "So, they're going to be constrained somewhat because the demand from Europe is low and now demand from us is getting weaker. That's why I think this is not a V-shaped recovery," but will be a slower rebound into the early summer, he continued.