The US Markit manufacturing PMI dropped from 50.7 to 49.2 in March, beating expectations of 42.8. Meanwhile, the Markit services PMI underwhelmed, falling from 49.2 to 39.1 vs. 42.8 expected. The service sector has been hit particularly hard by the coronavirus outbreak with the closure of many bars, restaurant, tours, and other services, and this is expected to worsen over the coming months.
- The manufacturing PMI performed better than expected with just a modest drop from 50.7 5o 49.2 vs. 42.8 expected.
- Services unexpectedly fell over 10 percentage points to 39.1 amid the closure of many services due to the coronavirus pandemic.
- The composite PMI hit an 11-year low of 40.5, down from 49.6.
Manufacturing in the US has yet to see any major negative effects of the virus pandemic, with plants and manufacturing facilities remaining open in most cases despite severe health warnings. Manufacturing has, however, slowed to a bottleneck with many automotive plants shutting down and international supply chains connected to the US severely disrupted. Experts now warn that the United States could become the next global epicenter of the coronavirus, with over 100 new deaths on Tuesday and 46,000 confirmed cases despite minimal testing nationwide.
The effect on American industry could be pronounced, leading to large-scale unemployment. The latest jobless claims figures showed an increase of 70,000 claims as the first round of pandemic-related layoffs begins to emerge. In China, the origin of the virus, industrial output has been severely curtailed.
However, it is the services industry that has borne the brunt of the virus so far. While factories in the US have put up protective barriers between workers, it is more difficult to shield those in services from human contact. Many services are considered non-essential in the short-term, leading to their temporary closure, and others are simply affected by the lack of travel and tourism as the US closes its borders.
U.S. March Markit PMI Surveys follow global collapse in Services with print below 40 pic.twitter.com/EysZiaPf9k
— Not Jim Cramer (@Not_Jim_Cramer) March 24, 2020
Hotels, restaurants, bars, and resorts across the country stand to face tough times as a result, and the latest PMI figures indicate that the effects of the pandemic are already making themselves known.
Chris Williamson, Chief Business Economist at IHS Markit, commented on the situation.
"US companies reported the steepest downturn since 2009 in March as measures to limit the COVID-19 outbreak hit businesses across the country. The service sector has been especially badly affected, with consumer-facing industries such as restaurants, bars and hotels bearing the brunt of the social distancing measures, while travel and tourism has been decimated."
Spot gold prices have seen exceptionally strong growth in today’s session, smashing through resistance at $1,600. Spot gold last traded at $1,598.24, up 1.99% with a high of $1,609.71 and a low of $1,546.56/oz. US PMI figures were not alone in their fall today, with the Eurozone composite PMI plummeting to a record low. Japan and the UK also saw drop-offs, as the viral pandemic gears up to seriously disrupt economic activity worldwide, strengthening the use case for gold as a safe haven asset.