Business

Drop in US manufacturing worsens

Activity is at lowest point since June 2009

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 on 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 per cent.

Mr 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," Mr 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 per cent 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 per cent.

Instead, manufacturing recorded its sixth straight monthly decline and its second month in contraction.

Mr 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 Mr 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.

Manufacturing represents around a tenth of overall US GDP, meaning the sector can contract without dragging the wider economy into a recession.

But trouble for factories is often an early warning, economists said. - AFP

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