Economy & Business

U.S. Manufacturing Slumps for Second-Straight Quarter as Recession Fears Loom

A trader works at the New York Stock Exchange, January 8, 2019. (Brendan McDermid/Reuters)

A gauge of the U.S. manufacturing sector released Tuesday showed that the month of September featured the largest contraction in the sector in more than ten years, due largely to the deleterious effect that Trump’s trade war has had on exports.

The report, released by the Institute for Supply Management, revealed that the remanufacturing Purchasing Manager’ Index came in at 47.8 percent, the lowest rate since June 2009 and the second consecutive negative quarter for U.S. manufacturing.

The news prompted a dramatic plunge in the stock market; the Dow Jones Industrial Average fell by more than 200 points in Tuesday afternoon trading.

The released data, which also showed new exports at a 10 year low, prompted fears that the domestic manufacturing sector is struggling to stay afloat during an escalating trade war with China. “Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019,” Timothy Fiore, ISM chair, said in a statement. Overall, sentiment this month remains cautious regarding near-term growth.”

“We have now tariffed our way into a manufacturing recession in the U.S. and globally,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, told CNBC. As of Tuesday afternoon, the Dow Jones Industrial Average had lost more than 250 points.

The new data also put a damper on recent reports that suggested manufacturing was making a comeback, as IHS Markit’s final U.S. Manufacturing Purchasing Managers’ Index showed a rebound to 51.1 percent in September, the highest number in the last five months.

“News of the PMI hitting a five-month high brings a sigh of relief, but manufacturing is not out of the woods yet,” Chris Williamson, the chief business economist at IHS Markit, reacted in a statement.

President Trump blamed the low numbers on the Federal Reserve and chairman Jay Powell in a tweet Tuesday.

The data also comes in the midst of President Trump’s strenuous use of tariffs to bring China to the negotiating table, a strategy largely opposed by U.S. business leaders. The Wall Street Journal reported Tuesday that, in the midst of impeachment fervor, China could use the president’s potential vulnerability as leverage in any trade discussions.

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