WASHINGTON (AP) — U.S. factory activity 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% in September, down from 49.1% in August. Any reading below 50 signals that the sector contracting.
AP Photo/Rogelio V. SolisThe nearly 15-month trade spat with China and tariffs on steel, aluminum 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 pullbacks 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 U.S.," 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% and 1.1%. New orders rose a slight 0.1% but remained in negative territory.