The number of respondents expecting business conditions to get worse during the next six months nearly doubled in the latest Marquette-ISM Report on Manufacturing.
In the February report, 17.7% of respondents said they expect things to get worse. In the March report, that figure jumped to 33.3%. Similarly, the number of respondents expecting things to get better was nearly cut in half from 41.2% to 22.2%.
As a result, the outlook’s diffusion index, which tries to balance positive and negative bias, dropped from 61.8% to 44.4%.
The seasonally adjusted Milwaukee-area PMI, typically the headline number in the monthly report, fell from 49.41 to 47.86. Any reading below 50 suggests the manufacturing sector in southeastern Wisconsin is contracting.
The index had trended down for much of 2019, but did see an upward trend in December and moved into positive territory in January. The growth was short-lived, however, and the index returned to negative territory in February.
Respondents pointed to supply chain issues caused by the coronavirus in China and other locations as one of the factors slowing the industry down.
In the March report, the coronavirus was predictably a more central reason for the decline in the index.
Respondents cited a large amount of uncertainty about future customer orders and continued supply chain interruptions. One noted that most suppliers are considered ‘essential’ and have continued operating but there are still delays because of the coronavirus.
Others noted the challenges created by more employees working remotely.
“Communication is becoming more crucial as customer service is working from home,” one respondent said.
Another cited remote work as a reason for greater delays in quotes and layoffs for shipping delays.
Looking beyond the coronavirus outbreak, one respondent suggested the current shutdowns could lead to less competition in the future.
“Concerned that when economy recovers, customers will expect a quicker reaction than possible,” another respondent said.
