ISM Manufacturing Index Moves Sharply Lower

• The Composite Index declined to the lowest level since April 2009.

• The orders, production & employment indexes fell significantly.

• Pricing power evaporated.

With the continued pressure from the coronavirus, the Composite index of manufacturing sector activity from the Institute for Supply Management (ISM) fell to 41.5 during April from 49.1 in March. A greater decline to 35.8  had been expected in the Action Economics Forecast Survey. During the last 15 years, there has been a 67% correlation between the composite index and the quarterly change in real GDP.

The new orders index collapsed to 27.1 from 42.2. It was the lowest level since December 2008. Just 18% (NSA) of survey respondents reported higher new orders while 60% reported lower. The production measure weakened sharply to 27.5 from 47.7 and closely matched the record low for this series which dates back to January 1948. Nearly two-thirds of respondents reported a lower level of production.

Adding to the weakness was a decline in the employment measure, also to 27.5 from 43.8, a record one-month drop. It also roughly matched the record low. Just three percent (NSA) of respondents reported higher payrolls while 47% reported a decline. During the last 15 years, there has been 80% correlation between the employment index and the m/m change in factory sector payrolls.

The supplier delivery measure surged to 76.0 from 65.0, indicating bottlenecks in the supply chain and the slowest product delivery speeds since 1974. The inventories measure backed up modestly to 49.7, but remained below the recent peak of 53.9 in August 2018.

The prices paid index fell sharply to 35.3 (NSA), its lowest point since January 2016. Only 10% of respondents reported higher prices while 39% reported a decline.

Other series in the ISM report indicated weakness. The export order measure plummeted to 35.3, the lowest point since late-2008 and down from a high of 62.8 in February 2018. The import series remained near its expansion low while the order backlog measure plummeted to 37.8 from 53.9 twelve months earlier.

The ISM figures are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's USECON database; further detail is found in the SURVEYS database. The expectations number is available in Haver's AS1REPNA database.

• Vehicle sales declined 49.6% in last two months.

• Car & light truck sales each suffer large losses.

Would-be motor vehicle buyers avoided dealer showrooms in April for a second straight month due to higher unemployment, fear of the coronavirus and stay-at-home orders. The Autodata Corporation reported that sales of light vehicles declined last month by 24.1% m/m (-47.9% y/y) to 8.60 million (SAAR) from 11.35 million in March. It was a record low level of sales for the series which dates back to 1980. Sales have been easing since the 2016 peak of 17.55 million units.

Sales of light trucks were off 21.5% (-43.8% y/y) to 6.59 million units. Purchases of domestically-made light trucks fell 23.3% (-42.9% y/y) to 5.23 million units. Sales of imported light trucks weakened 14.6% (-47.1% y/y) to 1.35 million units.

Trucks' share of the U.S. light vehicle market reached a record 76.6%, up from a low of 48.8% during all of 2012.

Auto sales weakened 31.4% (-58.1% y/y) to 2.01 million units and remained below a peak level of 7.71 million unit sales reached in 2014. Purchases of domestically-produced cars fell 31.5% (-58.4% y/y) to 1.48 million units. Sales of imported cars weakened 32.1% (-57.3% y/y) to 0.53 million units.

Imports' share of the U.S. vehicle market rose last month to 21.9%. Imports' share of the passenger car market eased to 26.4%. Imports share of the light truck market improved to 20.5% and remained up from the 12.0% low in January 2015.

U.S. vehicle sales figures can be found in Haver's USECON database. Additional detail by manufacturer is in the INDUSTRY database.