The composite index fell to an all-time low in March 2020 as domestic and foreign order activity weakened.
The index was hit hard in March when it was forced to shut down much of the world’s economy in an effort to slow the spread of COVID 19.Readings of new orders, exports, production and employment all hit record lows (see chart).But assuming the supplier has a higher backlog and takes longer to deliver parts to the manufacturer, the supplier’s deliveries increase as the supplier’s delivery speed slows.In the current situation, the massive disruption of covid-19 to the world supply chain leads to longer lead times (the red line above).
The composite index fell sharply to an all-time low of 38.4 in March as new orders, production, employment and exports hit record lows.The data for the second half of 2019 show business activity weakening, particularly in the aerospace and automotive markets, due to contract conditions.Then at the end of the first quarter, the world economy began to shut down as efforts to contain the spread of COVID 19 disrupted supply chains and led to a drop in business confidence.It is important to remember that these low index readings represent a decline in the level of business activity reported by manufacturers in March, and not to be confused with the actual rate of decline.
Unlike other components of the index, readings of supplier delivery activity rose significantly in March.Typically, when demand for upstream goods is high, the supply chain cannot keep up with these orders, resulting in a backlog of supplier orders that can extend lead times.This delay caused our surveyed companies to report slow delivery and, through our survey design, increased supplier delivery readings.In contrast to strong demand for upstream products, the global supply chain was disrupted and suppliers’ delivery times were extended, leading to an increase in readings.
The composite index is unique in that it measures the state of the composite industry on a monthly basis.
Post time: Apr-24-2020