United States manufacturing contracts for first time in 3 years

US manufacturing sector contracts for first time in 3 years

The US economy slowed by more than originally through t in the second quarter, IHS Markit said its preliminary gauge of US manufacturing activity fell for the first time a decade in August, and the University of Michigan's consumer-sentiment index posted its sharpest drop in six years last month. More than half of the public comments from companies surveyed by ISM pointed to the economic uncertainty as a drag on their businesses. While surveys of purchasing managers showed mixed results in China, manufacturing activity declined across Japan, Taiwan, and South Korea.

The sector is particularly susceptible to economic headwinds from the global economy because a sizeable portion of the demand for USA products comes from overseas.

The ISM tracks 18 manufacturing industries, and in August there were still nine industries reporting growth and seven industries reporting contraction.

Despite the pullback, former JPMorgan economist Anthony Chan tells FOX Business" "Varney & Co', "It is not signaling a recession yet" noting a read of 46 would be more problematic.

Contractions in USA manufacturing have not always preceded recessions in the wider economy but the latest ISM figures will no doubt raise fears of a downturn. The 2-year note rate slipped 6.4 basis points to 1.442%, while the 30-year bond yield slipped 4.8 basis points to 1.925%. "The survey is not yet consistent with a steep downturn in the broader economy - manufacturing already has been contracting for two quarters - but another couple of months of declines on this scale would leave the US facing an entirely unnecessary and self-inflicted recession". Construction spending fell 2.7% on a year-on-year basis in July.

But so far manufacturers aren't cutting back as much as they did then. He blamed shrinkage in the manufacturing sector on trade agreements such as NAFTA and the policies of the Chinese, and took credit when an American manufacturer agreed to create or save jobs in the United States.

More news: Killer in the Rich World

President Trump's fight with China, and his tariffs on steel and aluminum imports, are meant to help US manufacturers but are now having the opposite effect.

China on Monday announced that it had filed a case at the World Trade Organization against the United States following its implementation of the additional 15-percent tariffs imposed on 300 billion US dollars worth of Chinese imports on September 1. They also point to a trade war that shows little sign of stopping.

"Trade remains the most significant issue", said ISM's Timothy Fiore, who compiled the index.

Surveys of purchasing managers this week have suggested that the uncertainty generated by the trade war has hit manufacturers on a global scale.

The disappointing PMI data weighed on the Greenback and forced the US Dollar Index to return to the 99 mark from the multi-year highs that it set at 99.37 earlier today. Their global manufacturing index rose from 49.3 to 49.5 in August, but remained in contraction territory.

ISM Manufacturing PMI drops to lowest level in three years in August.

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