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Manufacturing And Services: Coronavirus Punishes The Economy

Dividend Power profile picture
Dividend Power


  • The U.S. April 2020 PMI is 41.5 indicating contraction.
  • The U.S. April 2020 NMI is 41.8 indicting contraction.
  • COVID-19 and the decline in oil prices were severely impacting the U.S. economy.
  • The U.S. economy is contracting after over 10-years of expansion.

A greater impact was seen in the indices for manufacturing and services in April. This was due to the combined effect of the coronavirus and oil price wars that have affected the global and U.S. economies. The PMI came in at a reading of 41.5 in April 2020. This was a large drop from March's reading of 49.1. This reading represents the second straight month of contraction for manufacturing. A value over 50 indicates expansion and a value under 50 indicates contraction. Importantly, the U.S. economy as a whole is now contracting after 131 consecutive months of expansion. In 2019, even when manufacturing was contracting, services were expanding. This is no longer the case as services contracted in April 2020, as I discuss below.

U.S Economy and Market OutlookSource: Dividend Power

Notably after contracting for a good part of 2019, it looked like U.S. manufacturing was recovering in the early part of 2020. But the impact of coronavirus spread across the globe and essentially stopped the global economy for several weeks. The only industries that performed well were Paper Products; and Food, Beverage & Tobacco Products. This is not surprising considering that consumers were hoarding basic necessities and essentials. Notably, I made the call last month that pretty much only Food, Beverage & Tobacco Products would grow. Looking ahead I think that most industries will remain slow. With that said, restrictions are starting to ease in some states. This bodes well for future PMI readings.

U.S. ISM Manufacturing PMI April 2019 - April 2020

US PMISource: Statista

Only Inventories Are Increasing

The impact of COVID-19, oil price wars, and transportation restrictions rapidly propagated through the U.S. manufacturing sector and economy in a few short weeks. In April, only 2 out of 18 industries reported growth. This is down significantly from March. Listed in order these are Paper Products; and Food, Beverage & Tobacco Products.

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Dividend Power profile picture
I am a self-taught individual investor and I have been investing in stocks for approximately 20 years. I focus on dividend growth investing with a long-term horizon since I believe in the compounding power of dividend growth investing. I generally look for undervalued large cap stocks with sustainable dividend growth and capital appreciation potential. My second focus is tech and small- or mid-cap stocks with or without dividends for their growth potential. I try to provide a little more in depth analysis weighing the positives and negatives. You can see my performance at my Tip Ranks profile. I am now in the Top 100 out of 13,540 (73rd and in the top 1.0%) financial bloggers (August 2022).You can follow me at my blog Dividend Power. Read my e-book --> 10 Forever Dividend Growth StocksI also write stock analyses for Sure Dividend as a part-time free lance equity analyst. I provide investment analyses and research for their Sure Analysis Research Database. Additionally, I write stock snapshots and other research for Portfolio Insight.

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