Reuters says (Oct 1, 2019):

U.S. manufacturing activity tumbled to a more than 10-year low in September as lingering trade tensions weighed on exports, further heightening financial market fears of a sharp slowdown in economic growth in the third quarter.

The survey from the Institute for Supply Management (ISM) on Tuesday came on the heels of data last week showing a cooling in consumer spending in August. The economy’s fading fortunes have been attributed to the Trump administration’s 15-month trade war with China, which has sapped business confidence and undermined manufacturing.

Ironically, manufacturing has borne the brunt of the trade tariffs, which the White House says are necessary to protect industries from what it says is unfair foreign competition. President Donald Trump blames the Federal Reserve, in particular Chair Jerome Powell, for the manufacturing sector’s malaise.

“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 wrote on Twitter shortly after the ISM survey was published. “Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!”


“It couldn’t be more ironic that the trade tariffs done to bring factories back from overseas, are actually shutting down production at existing plants here in the U.S.” said Chris Rupkey, chief economist at MUFG in New York. Machinery manufacturers said demand was “softening on some product lines, backlogs have reduced, and dealer inventories are growing.” Electrical equipment, appliances and components makers noted that the “economy seems to be softening,” adding that “tariffs have caused much confusion in the industry.”

So we have two competing narratives here, not necessarily mutually exclusive:

  • Trump says the manufacturing slump is due to US interest rates being too high
  • Others blame the trade war(s) started by Trump

Is there any economic analysis that can shed more light on this, or is it just going to be a matter of competing opinions?

(The Eurozone manufacturing also shrank as did the UK's.)


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