The latest Institute for Supply Management (ISM) “Report on Business” shows the coronavirus is having a negative impact on deliveries of manufacturing inputs and components, but there were some positive signs on the ground.
The delivery performance of suppliers to manufacturing organizations was slower in February, as the Supplier Deliveries Index registered 57.3 percent. This was 4.4 percent higher than the 52.9 percent reported for January. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.
“Suppliers continue to struggle to deliver, at a stronger rate compared to January,” Timothy R. Fiore, chair of the ISM manufacturing business survey committee, said. “The index reached its highest level since November 2018, when it registered 61 percent. Lead times are generally stable. Concerns about current and ongoing reliable Asian supply dominated the comments from panelists.”
The news comes after Wells Fargo Securities last month said U.S. businesses have a sufficient inventory of inputs and components to withstand short-term supply chain disruption stemming from the deadly coronavirus outbreak that originated in Wuhan, a city of 11 million people in central China, and has infected nearly 90,000 people worldwide. As of Tuesday, 3,131 people have died from the viral outbreak.
There was some good news out of ocean container freight carrier CMA CGM Group regarding “the evolving COVID-19 situation in Mainland China.”
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“Manufacturing activities are gradually picking up, more port workers and truck drivers are returning to their posts and cargo flow is easing up at the major coastal ports,” CMA CGM said Monday. “In short, business operations have now entered the recovery phase.”
In the ISM report, the 13 industries reporting slower supplier deliveries in February were led by textile mills, apparel, and leather and allied products. NCTO president Kim Glas has touted the American textile industry’s readiness to help apparel brands shift their sourcing stateside amid coronavirus disruption.
Meanwhile, economic activity in the manufacturing sector grew in February, and the overall economy expanded for the 130th consecutive month, according to the report. Fiore reported that the February Purchasing Managers Index (PMI) fell 0.8 percent from January to 50.1 percent.
The New Orders Index registered 49.8 percent, a decrease of 2.2 percentage points from the January reading of 52 percent. The Production Index was 50.3 percent, down 4 percent compared to January.
“Comments from the panel were generally positive, with sentiment cautious compared to January,” Fiore said. “The PMI remained in expansion territory, but at a weak level. Demand slumped, with the New Orders Index contracting at a weak level, despite new export order expansion. The Customers’ Inventories Index remaining at ‘too low’ status and the Backlog of Orders Index expanding for the first time in several months, but at a slow rate.”
The 14 manufacturing industries that reported growth in February included textile mills.
ISM’s Production Index registered 50.3 percent in February, 4 percent lower than the 54.3 percent reported for January, registering two months of growth following five consecutive months of contraction. An index above 51.7 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
The 12 industries reporting growth in production included textile mills, while industries reporting a decrease in production in February included apparel and leather and allied products.
The ISM Prices Index registered 45.9 percent in February, a decrease of 7.4 percent from the January reading of 53.3 percent, indicating raw materials prices decreased after increasing for two consecutive months. Textile mills were among the industries reporting paying increased prices for raw materials in February.