New vehicles sit outside an idled Fiat Chrysler plant in Detroit on March 23.
Photo: Anthony Lanzilote/Bloomberg NewsU.S. manufacturing stalled last month. It is, of course, only the start.
The Institute for Supply Management on Wednesday said that its manufacturing index slipped to 49.1 in March from 50.1 in February. That was only marginally below the 50 level that separates expanding and contracting factory activity, but it was deceptive. Most components of the index, including new orders, production and employment, showed starker drops. A slowdown in supplier deliveries boosted the overall number.
When delivery times slow down it usually is a sign that suppliers are struggling to meet rising demand and business is picking up. Now, with the world buckled by the coronavirus pandemic, that isn’t the case. Rather, it reflects severe supply chain disruptions that began when China shut down its economy.
A month ago, those disruptions seemed like the worst problem manufacturers faced. Not any more. The stifling of consumer spending in the U.S. and elsewhere is cutting mightily into sales. Fiat Chrysler Automobiles on Wednesday reported that its first-quarter U.S. sales fell 10% from a year earlier despite strong results in January and February—a testament to just how bad March was. And it seems likely that most of the March slump occurred in the latter half of the month.
April will only be harder for manufacturers. With more states and localities stepping up efforts to halt the spread of the virus and more Americans adopting social distancing measures, demand will fall further. Moreover, manufacturers have the safety of their own workers to consider: Each month the ISM notes commodities that manufacturers say are in short supply, a list that usually features items such as resistors or helium. In the March report it included cleaning wipes, hand sanitizer, personal protective equipment and toilet paper.
For manufacturers, as with all of us, the two big questions are how long this will last and what sort of economy will be left in its wake. The answer to the first question will depend on how successful efforts are to stop the virus. The answer to the second will depend on how many businesses and jobs are left standing when this is over.
Some of those businesses are manufacturers, and some of those jobs are manufacturing jobs. The more that survive, the easier it will be to turn the economy’s engine over.
Write to Justin Lahart at justin.lahart@wsj.com
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