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May 1, 2020 12:00 PM, EDT

Manufacturing Falls in April as Virus Ravages Economy

Construction Spending Increases 0.9% in March
Ford assembly lineMachines work on an assembly line at Ford's Chicago Assembly Plant in 2019. (Amr Alfiky/AP)

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WASHINGTON — U.S. manufacturing retreated again in April, a victim of economic fallout from the coronavirus outbreak.

The Institute for Supply Management, an association of purchasing managers, reported May 1 that its manufacturing index dropped to 41.5 last month from 49.1 in March. Anything below 50 signals contraction.

The news was bad across the board: Production, new orders, hiring and export orders all fell faster in April than they did in March.

“The underlying details indicate a severe downshift in activity as production and employment contracted at a record pace,” economists Oren Klachkin and Gregory Daco of Oxford Economics wrote in a research report. “New orders signal that activity is unlikely to improve in the near-term.”

Economists had expected an even bigger drop.

The COVID-19 pandemic and the quarantines, travel restrictions and business closings imposed to combat it have hammered global manufacturers, disrupting their access to supplies and crushing demand for their products.

The U.S. economy has slid into recession: Gross domestic product — the broadest measure of economic output — fell at a 4.8% annual pace from January-March, worst since the recession year 2008, even though the United States only began to go into a lockdown in mid-March. The April-June quarter is expected to be by far the worst in Commerce Department records dating to 1947.

Economists had expected an even bigger drop in the ISM’s manufacturing index.

Manufacturing was already hurting before the outbreak brought the economy to a near-standstill in March. The ISM manufacturing index has fallen seven of the last nine months. President Donald Trump’s trade war with China had raised costs and created uncertainty that paralyzed investment decisions.

Construction Spending Rises 0.9% in March

U.S. construction spending edged up 0.9% in March as building activity escaped the early impacts of the coronavirus shutdowns.

The Commerce Department said that the increase followed a 2.5% drop in spending in February. Economists had been forecasting another decline in March as the efforts to contain the spread of the virus started to take hold.

While the overall figure did not decline in March, analysts believe big drops in activity will start showing up in the April report given the impacts already seen in other parts of the economy.

For March, residential construction rose up 2.3% as strength in apartment construction offset a drop in single-family homes.

Nonresidential construction fell 1.3%, with spending for hotels and office buildings both declining.

Spending for government projects was up 1.6% in March.

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