US manufacturing contracts in September to lowest since 2009: ISM

WASHINGTON The recession in US manufacturing

worsened last month as plunging global demand and trade frictions drove

activity to its lowest point since the Great Recession, according to an

industry survey released Tuesday.

The unexpected drop in the Institute for Supply Management's closely-

watched index was another worrying sign for the US economy, amid President

Donald Trump's trade war with China, slowing consumer spending and weaker

sales of major factory-made goods.

The bad news knocked the wind out of Wall Street's sails, with the Dow

Jones Industrial Average closing down 1.3 percent.

Trump blamed the Federal Reserve, rather than his own trade wars, accusing

the central bank and Fed Chair Jerome Powell of hurting factory output by

allowing the US dollar to strengthen, by failing to cut interest rates

aggressively, which puts American exports at a disadvantage.

As I predicted, Jay Powell and the Federal Reserve have allowed the

Dollar to get so strong, especially relative to ALL other currencies, that

our manufacturers are being negatively affected, Trump said on Twitter in

yet another attack on the independent institution.

They are their own worst enemies, they don't have a clue. Pathetic!

ISM's manufacturing index fell 1.3 points to 47.8 percent in September,

the lowest point since June 2009 and showing continued contraction. Any

reading above 50 indicates growth.

Economists had expected the index to recover to above 50 percent. Instead,

manufacturing recorded its sixth straight monthly decline and its second

month in contraction.

'Warning signs are clear'

Timothy Fiore, chair of ISM's manufacturing survey, told reporters the

index was unlikely to see a meaningful recovery so long as demand remained

low.

Clearly without new orders picking up, the number's going to stay down,

he said. I think we're sitting in a position here where we're at a level

that will probably continue.

There was little sign among survey respondents that a three-week

nationwide strike by auto workers or recent gyrations in oil prices had

caused difficulties, he added, although that could change if the strike at

General Motors persists.

Many of the comments from survey participants point to Trump's trade war

with China, noting that the retaliatory tariffs are hurting business and

undermining confidence, despite comments from administration officials

claiming Americans have not been impacted by the dispute.

A major concern was the computers and electronics sector, Fiore said.

That has been one of the primary engines of growth for the last three

years and it's now in a contraction mode, he said.

Total new orders for manufactured goods were at their lowest since 2012.

Export orders, which feed into overall orders, fell to 41 percent, their

worst month since March of 2009.

Manufacturing represents around a tenth of overall US GDP, meaning the

sector can contract without dragging the wider economy into a recession, as

it has in the past.

But trouble for factories is often an early warning, economists say.

Of 18 industries surveyed, three experienced growth miscellaneous

goods, food and chemical products and even they reported growth was weak

to flat.

In the miscellaneous category, a respondent said growth has slowed

dramatically, while in fabricated metals, a sector enjoying robust trade

protection from the Trump administration, a company said the market was

slowing even more than normal for the fourth quarter.

Ian Shepherdson of Pantheon Macroeconomics said the ISM report was pretty

awful.

This survey is a not consistent with recession across the whole economy,

he said in an analysis.

But the warning signs here are clear enough. The trade war is wreaking

havoc, to the point where the incipient upturn in manufacturing in China is

not transmitting, at all, to the US.

Source: Bangladesh Sangbad Sangstha (BSS)