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New Survey Shows Manufacturing Activity Slumped In March

RACHEL MARTIN, HOST:

We're getting some new information this morning about how the coronavirus is affecting the nation's factories. A new survey shows that manufacturing activity was down last month; new orders, production and employment all down. Those are just some of the ways this pandemic and the government's efforts to address it are slamming the brakes on the U.S. economy. NPR's Scott Horsley joins us now. Hi, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Rachel.

MARTIN: Well, what does this new survey tell us about how manufacturers are coping right now?

HORSLEY: The people who put together this survey asked factory owners to rate their activity in a variety of ways. You mentioned some of them - new orders, new hires, inventories, that kind of thing. And as you go down the tallied responses, the word you see over and over again is contracting. Factories are hunkering down, pulling in their horns, just like the rest of us. And you have to remember, Rachel, the manufacturing sector felt the effects of this pandemic months earlier than other kinds of businesses. You know, they knew when their suppliers in Asia were being affected, and they certainly knew when their customers in Asia and Europe were feeling the pain.

On top of the coronavirus, you also have this very steep drop we've seen in oil prices, which is cutting demand for manufactured pumps and pipelines and the like. And of course, you have Boeing's ongoing problems with its 737 Max jets. So America's manufacturing sector is definitely feeling a slowdown.

MARTIN: I mean, we've heard so much about how the coronavirus has affected bars and restaurants, sports, entertainment. There's been far less discussion about how factories are faring, right?

HORSLEY: Yeah. You know, when we all started practicing social distancing, some of the businesses that felt that most immediately were those service industries where there's a lot of face-to-face contact - bars and restaurants, theaters. Many of those businesses were forced to close their doors very abruptly. For most people, though, factories are less visible, you know, unless you're...

MARTIN: Yeah.

HORSLEY: ...In that fairly small slice of the labor force that works in manufacturing. But certainly, factories and factory workers are vulnerable to the coronavirus here and the economic effects. This is not a job that can easily be done remotely from home.

So factory managers have a choice to make. Some of the big factories, the big automakers for example, have just closed their doors under pressure from the UAW to protect their workers. Other factories are trying to maintain operations, but that poses its own challenges. How do you keep workers safe in an environment where it may be difficult to have co-workers stand six feet away from each other? Factories are making adjustments. One machine shop owner reported a 30% decline in productivity.

MARTIN: Wow. At the same time, I imagine demand is just down for factory goods.

HORSLEY: For a lot of goods, it is. Although it's kind of a mixed bag. Certainly, for the big-ticket items demand has dropped. That's one reason carmakers were not too unhappy about closing their plants for a bit. Nobody's out shopping for cars right now. Not many people are out shopping for furniture, either. Factories that supply the hospitality business have certainly seen a drop in their business, as the hospitality business has really hit a wall here.

On the other hand, food and beverage manufacturers say they're busier than ever. One reported a record number of orders due to COVID-19. Food and beverage companies were the strongest category in this factory report. And I should add, makers of paper products also reported strong growth.

MARTIN: Right, that toilet paper everyone seems to want to buy. NPR chief economics correspondent Scott Horsley. Scott, thank you.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

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