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Manufacturing Barely Expands Amid Coronavirus Concern

Bill Koenig
By Bill Koenig Senior Editor, SME Media

Manufacturing barely expanded in February as concern about the coronavirus grew, the Institute for Supply Management said today in a monthly report.

The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, was 50.1 percent for the month. ISM said production increased but new orders and employment contracted. The February PMI was the second straight month showing economic expansion but it was not as strong as January’s 50.9 percent.

The PMI is based on a survey of 350 purchasing and supply executives across 18 industries. In January, only 2.4 percent of respondents reported issues with the coronavirus disease. In February, 18 percent said they experienced coronavirus-related issues and another 24 percent said they expect to deal with such problems soon.

“This thing is moving very quickly,” Timothy R. Fiore, chair of ISM’s Business Survey Committee, said on a conference call. “We’re in the early phases of this.”

The virus first broke out in China, disrupting manufacturing in that country. For manufacturers, that has created logistics and supply chain issues involving China-made parts and products.

The disease has now spread to elsewhere in Asia as well as Europe. The number of confirmed cases in the U.S. also is growing and two U.S. deaths from the virus have been reported.

The Geneva Motor Show, a major auto industry event, was canceled for this year after the Swiss government banned gatherings of 1,000 people or more.

ISM originally forecast that 2020 would see steady economic growth in manufacturing. Now, Fiore said, the group expects the impact of the coronavirus will be felt in manufacturing through June. “Half two is going to be better than half one,” he said.

The PMI is considered a leading economic indicator and a barometer of where the economy is heading. A PMI reading above 50 percent indicates economic expansion while below 50 percent reflects contraction. The PMI has averaged 50.5 percent for the past 12 months.

In February, 14 of 18 industries reported economic expansion, including wood products, furniture, primary metals, fabricated metal products, and miscellaneous manufacturing. Three industries reported contraction, including transportation equipment.

ISM’s New Orders Index slipped in February to 49.8 percent, down from 52 percent the month before. Still, 16 industries reported an increase in new orders. Two industries reported a decline, including transportation equipment.

The group’s Production Index fell but remained in positive territory at 50.3 percent. That compares with 54.3 percent in January. Twelve industries reported a gain in output while three reported a decline.

The institute’s Employment Index improved slightly but was still in negative territory at 46.9 percent last month. That compares with 46.6 percent in January. Three industries reported job gains and nine reported job cuts.

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