America's manufacturing activity is about to crash by the most since World War II: Goldman Sachs
It could be a very bleak earnings season — and summer — on tap for some of the nation’s biggest manufacturers if Goldman Sachs is right.
Goldman Sachs estimates in a new report Tuesday that U.S. manufacturing production has declined by 15% since the start of the coronavirus outbreak. Some of the more cyclical components of manufacturing activity have crashed by 35%, Goldman notes.
The road ahead will probably stay brutal, per Goldman’s research, as the likes of GM and Ford keep auto plants shuttered and closed retailers decline to order new merchandise.
Goldman estimates a roughly 25% decline in overall manufacturing activity in April compared to pre-coronavirus levels. That would mark the largest decline in manufacturing output since the slowdown immediately following World War II, according to Goldman.
The bank’s strategist Jan Hatzius believes that manufacturing and construction sectors will recover quicker from the current situation than services.
“Virus prevention measures are likely more straightforward to implement in these industries (via increased on-site cleaning, increased protective equipment, staggered schedules) than in consumer services that involve much more face-to-face contact. In addition, plant and site shutdowns are far more common in the manufacturing and construction sectors, so firms can likely build on past experience to accelerate their restarts,” Hatzius writes.
Investors may be in agreement with Hatzius’ view on the industrial recovery.
The iShares U.S. Industrials ETF has gained 8% over the past month, outperforming the broader S&P 500’s 4.7% increase.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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