IceStone

Apr 3, 2023

A worker stands near the chimney stacks of a neighbouring factory at IceStone, a manufacturer of recycled glass countertops and surfaces, in New York City, New York, U.S., June 3, 2021. Reuters U.S. manufacturing activity slumped to the lowest level in nearly three years in March as new orders plunged, and activity could decline further amid tightening credit conditions. The Institute for Supply Management (ISM) survey on Monday also showed a continued reduction in factory employment last month, but inflation pressures subsided, with supplier delivery performance the fastest since March 2009. Rising borrowing costs as the Federal Reserve fights high inflation have cooled demand for goods, which are typically bought on credit. "Manufacturing activity is moving deeper into the red and the million-dollar question is whether sputtering factory output will spread to the rest of the economy," said Christopher Rupkey, chief economist at FWDBONDS in New York. "New orders are off sharply in March and that could very well lead to production shutdowns and more layoffs later on this spring and summer." The ISM's manufacturing PMI fell to 46.3 last month, the lowest reading since May 2020, from 47.7 in February. Economists polled by Reuters had forecast the index would dip to 47.5. It was the fifth straight month that the PMI remained below the 50 threshold, which indicates contraction in manufacturing. But so-called hard data have suggested that manufacturing, which accounts for 11.3% of the economy, continues to grow moderately. Manufacturing expanded at a 4.5% annualized rate in the fourth quarter, the government reported last week. Reports last month also showed orders for capital goods excluding aircraft eked out a small gain in February as did manufacturing output. According to the ISM, 70% of manufacturing gross domestic product was contracting in March, down from 82%. It, however, noted that more industries contracted strongly last month. "The proportion of manufacturing GDP with a composite PMI calculation at or below 45 percent, a good barometer of overall manufacturing sluggishness, was 25 percent in March, compared to 10 percent in February," said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. Of the six largest manufacturing industries, only petroleum and coal products as well as machinery, registered growth in March. Other manufacturing industries reporting growth were printing and related support activities, miscellaneous manufacturing, fabricated metal products and primary metals. Twelve industries reporting contraction included furniture and related products, nonmetallic mineral products, textile mills, transportation equipment and computer and electronic products as well as electrical equipment, appliances and components. Comments from manufacturers were mostly downbeat. Transportation equipment producers said "sales are slowing at an increasing rate, which is allowing us to burn through back orders at a faster-than-expected pace." Electrical equipment, appliances and components manufacturers reported that "new orders are starting to soften." Makers of chemical products said "sales (were) a bit down, and budgets being cut with a greater emphasis on savings." But food, beverage and tobacco products manufacturers said "business is doing generally well, with input costs falling in some areas and rising in others." U.S. stocks were trading mixed. The dollar fell against a basket of currencies. U.S. Treasury prices rose. Graphic-ISM Manufacturing PMI,