US Manufacturing Shrinks to Lowest Level in 11yrs

May 3, 2020
US Manufacturing Shrinks to Lowest Level in 11yrs May 3, 2020 Lennox Hamilton

The euro hit $1.0994 Friday, reflecting the highest level since last month, after the European Central Bank maintained its benchmark interest rates, while reducing the interest rate on emergency loan scheme for banks.

Investors were anticipating the central bank to boost its bond purchase program such that it covers junk-rate bonds as countries across Europe may be downgraded by credit rating agencies in the weeks ahead.

The ISM Manufacturing PMI for the US declined to 41.5 In April, from 49.1 in the earlier month, and surpassing economists’ expectations for a reading of 36.9.

It is the sharpest ever contraction recorded in the manufacturing industry in the past eleven years.

While the sub-index reflecting fresh orders in the manufacturing industry dropped to the lowest since April 2009, the employment sub-index plummeted to the lowest since February 1949.

The lower-than-anticipated decline in the ISM index was mainly due to the survey’s reading of supplier deliveries soared which is normally linked with strong client demand, but due to virus-related supply limitations in this unusual scenario.

In the US construction spending grew 0.9% from the earlier month to a yearly rate of $1.360 trillion in March 2020, bouncing from an upwardly amended 2.5% decline in the earlier month and surpassing market anticipations for a 3.5% decrease.

Investment in public construction ventures rose 1.6%in march, compared with a contraction of -0.6% in the earlier month and those on private construction increased 0.7% (compared with -3.1%). On y-o-y basis, construction spending increased 4.7%.

The IHS Markit’s manufacturing PMI was downwardly altered to 36.1 in April 2020 from a preliminary outlook of 36.9, compared with March’s final estimate of 48.5.

The latest figure was the lowest in 11 years as fresh orders, output and exports dropped at record rates due to initiatives taken to limit the coronavirus outbreak.

During the same period, employment fell to the lowest level since March 2009 because of higher capacity, as backlogs declined by the fastest rate in 11 years.

As far as price is concerned, input costs declined amidst a decrease in demand for inputs and a remarkable drop in fuel prices, while output fees fell the most since information retrieval started in May 2007.

The Wall Street stocks lost value Friday after President Donald Trump threatened to slap fresh duties on China over the pandemic, stating that he was worried about the country’s contribution in the coronavirus outbreak and that the trade agreement between Beijing and Washington had turned out to be secondary “to what took place with the virus”.

Corona infections across the globe have crossed 3.40 million, with 240,000 people losing their lives so far. 1.09 million people have recovered until now.

Specifically, in the US, the number of infected people has increased to 1.13 million, reflecting 33% of cases worldwide.

In Spain, the most affected country in the Europe so far, has recorded over 243,000 cases, followed by the UK, Italy, France and Germany. Outside the Europe or the US, Turkey recorded highest number of cases, with 122,000 infections.

With 66,000 deaths, the US tops the list of maximum number of deaths due to coronavirus. It is followed by Italy, the UK, Spain and France.

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