News & Politics

U.S. Manufacturing Contracts Down for First Time in a Decade

Image via Shutterstock, an American flag with gears of industry.

A worrying sign for the White House was released today with the manufacting purchasing orders shrinking for the first time since 2009.

CNBC:

U.S. manufacturer growth slowed to the lowest level in almost 10 years in August, the latest sign that the trade war may be exacerbating the economic slowdown.

The U.S. manufacturing PMI (purchasing managers’ index) was 49.9 in August, down from 50.4 in July and below the neutral 50.0 threshold for the first time since September 2009, according to IHS Markit.

Any reading below 50 signals a contraction. The survey is an initial reading for the month of August. The final figure will be released Sept. 3.

Obviously, there’s no need to panic. And it’s not just the U.S. that’s experiencing a slowdown:

“Manufacturing companies continued to feel the impact of slowing global economic conditions,” Tim Moore, economics associate director at Markit, said in a statement Thursday. “August’s survey data provides a clear signal that economic growth has continued to soften in the third quarter.”

Manufacturing had been one of the big winners during the Trump administration, but the tit-for-tat tariffs in the U.S.-China trade war have taken a big bite from the sector. U.S. manufacturing activity slowed to a nearly three-year low in July, based on data from the Institute for Supply Management.

Trump’s strategy of inflicting pain on China is working. But the Chinese don’t care. They have a command economy and the leaders are not answerable to the people.

Trump, on the other hand, must face the voters in 2020. And many people are getting nervous about the economy.

New York Times:

Nearly three in five respondents to the survey said they were worried about the economy, regardless of whether they were personally struggling or doing well financially. That group cuts across party lines and encompasses a large group of voters who could collectively sink Mr. Trump’s re-election chances, including three in 10 Republicans and seven in 10 independents.

If you were exposed to headlines screaming about a coming recession and constant talk on the cable nets of a downturn, don’t you think you’d be a little nervous too?

The point is, it’s not economic projections that will determine Trump’s re-election. It’s the economy in the real world. Artificially created panics come and go, but in the end it’s how the voter feels about his personal financial situation that will sink Trump or bring him another term.

The underlying economy is still strong. Jobs are still being created. Unemployment is still low. Inflation is still under control. Business expansion is continuing.

Trump will probably be forced to pick up whatever winnings he has and get up from the table with China. He’ll find a way to spin the outcome as big victory, but it won’t matter. What matters is those orders for U.S. manufactured goods pouring in from China again.

Getting the factories humming again would almost guarantee his re-election.