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Survey: American manufacturing activity sinks to decade low

Published:Wednesday | October 2, 2019 | 12:21 AM
In this September 18, 2019, photo, a Puckett Machinery Company technician walks past a new heavy-duty Caterpillar excavator that awaits modification at Puckett Machinery Company in Flowood, Mississippi.
In this September 18, 2019, photo, a Puckett Machinery Company technician walks past a new heavy-duty Caterpillar excavator that awaits modification at Puckett Machinery Company in Flowood, Mississippi.

Factory activity in the United States hit its lowest level in more than a decade, as President Donald Trump’s trade wars take a toll on American manufacturing.

The Institute for Supply Management, an association of purchasing managers, said Tuesday that its manufacturing index shrank for the second straight month to 47.8 per cent in September, down from 49.1 per cent in August. Any reading below 50 signals that the sector is contracting.

The nearly 15-month trade spat with China and tariffs on steel, aluminium, and other products may have been intended to help US manufacturers. But it appears to be having the opposite effect, spurring the Federal Reserve cut rates by a quarter-point in September for the second time this year. Weakening business confidence and softening global demand have also hit American factories hard, prompting pull-backs in both production and employment. This month’s measure reported the lowest level of manufacturing activity since June 2009, the last month of the Great Recession.

“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,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Some economists also said that the ongoing union worker strike at General Motors could have played a role in a slower automotive market.

“That strike has now begun to affect production at suppliers, too,” said Paul Ashworth, chief US economist at Capital Economics. “When the strike ends, we would expect the manufacturing sector surveys to rebound, too.”

Measures of production and employment slipped by 2.2 per cent and 1.1 per cent. New orders rose a slight 0.1 per cent but remained in negative territory.

AP