The Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) is a widely followed economic indicator that measures the health of the manufacturing sector in the United States. The PMI is based on a survey of purchasing managers in the manufacturing industry, and it provides valuable insights into the current state of the economy.
In March 2020, the ISM Manufacturing PMI fell to 46.3, missing the expected mark of 47.5. This was a significant drop from the February reading of 50.1, and it marked the lowest level since June 2009. The decline in the PMI was largely driven by the impact of the COVID-19 pandemic on the manufacturing sector.
The PMI is a diffusion index, which means that it measures the percentage of respondents who report an increase in activity, minus the percentage who report a decrease. A reading above 50 indicates expansion in the manufacturing sector, while a reading below 50 indicates contraction.
The March reading of 46.3 indicates that the manufacturing sector in the US is contracting at a faster pace than expected. The decline was driven by a sharp drop in new orders, which fell to 42.2 from 49.8 in February. This suggests that manufacturers are seeing a significant decline in demand for their products.
The employment component of the PMI also fell sharply, dropping to 43.8 from 46.9 in February. This indicates that manufacturers are cutting jobs at a faster pace than they were previously.
The decline in the PMI was not unexpected, given the widespread disruption caused by the COVID-19 pandemic. Many manufacturers have been forced to shut down production due to supply chain disruptions and reduced demand for their products. The closure of non-essential businesses and social distancing measures have also had a significant impact on the manufacturing sector.
The decline in the PMI is likely to have a significant impact on the US economy as a whole. The manufacturing sector is a key driver of economic growth, and a contraction in this sector can lead to job losses and reduced economic activity.
The Federal Reserve has already taken steps to support the economy in response to the COVID-19 pandemic. The central bank has cut interest rates to near-zero and launched a range of lending programs to support businesses and households.
The US government has also passed a $2 trillion stimulus package, which includes direct payments to households, expanded unemployment benefits, and loans for small businesses. These measures are designed to support the economy and help mitigate the impact of the COVID-19 pandemic.
In conclusion, the ISM Manufacturing PMI in the US fell to 46.3 in March, missing the expected mark of 47.5. This decline was largely driven by the impact of the COVID-19 pandemic on the manufacturing sector. The decline in the PMI is likely to have a significant impact on the US economy, and policymakers have already taken steps to support businesses and households during this challenging time.
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