Survey: U.S. manufacturing activity contracted in August

WASHINGTON — U.S. factory activity shrank in August for the first time since August 2016, a sign that the trade war with China is weighing down a crucial sector of the economy.

The Institute for Supply Management, an association of purchasing managers, said Tuesday that its manufacturing index slid to 49.1 last month, from 51.2 in July. Any reading below 50 signals a contraction. That’s the lowest for the index since January 2016.

A global softening in demand, worsened by an increasingly high-risk trade war between the U.S. and China, appears to be hurting American manufacturers. More than half of the public comments from companies surveyed by ISM pointed to economic uncertainty as a drag on their businesses.

Investors were dismayed by the news. Stock prices, which had already fallen at the market’s open, dropped further after the report’s release. The Dow Jones Industrial Average slumped 361 points, or 1.4%, in late morning trading.

Factories are cutting jobs for the first time since September 2016, as the employment index fell 4.3 points to 47.4. A measure of new orders fell by 3.6 percentage points, a sign that output may continue to decline. A measure of production declined by 1.3 points.

Timothy Fiore, chairman of the ISM’s Manufacturing Business Survey Committee, said that the decline in new orders was driven by the contraction in new export orders, which fell to their lowest since April 2009, when global trade was hit by the financial crisis.

“Tariffs are still weighing heavily on supply managers’ minds as they adjust their supply or manufacturing sources,” Fiore said. “Some industries can do it quickly while others need more time.”

As the report indicates a steady decline in future manufacturing, economists have also speculated whether a grim picture of U.S. manufacturing will spill over to affect other areas of the economy.

“Another couple of months of declines on this scale would leave the U.S. facing an entirely unnecessary and self-inflicted recession,” Ian Shepherdson, the chief economist at Pantheon Economics, wrote in a research note.

Surveys of purchasing managers this week have suggested that the uncertainty generated by the trade war has hit manufacturers on a global scale. While surveys of purchasing managers showed mixed results in China, manufacturing activity declined across Japan, Taiwan, and South Korea. In Europe, German manufacturing activity remained close to July’s seven-year low, as new orders fell, producers scaled back output, and job losses rose steeply.

As concerns about a global economic slowdown grow and trade tensions begin to weigh on business sentiment, some economists have also speculated on how the Federal Reserve will react.

Andrew Hunter, senior economist at Capital Economics, said that the ISM report makes it more likely that the Fed will cut rates at its next meeting in two weeks.

“That will only reinforce the concerns of Fed officials over the impact of trade uncertainty on the economy,” he wrote in a note to clients.

Meanwhile, a new round of tariffs on Chinese goods started Sunday, in the latest escalation of the trade war between Washington and Beijing.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Conservatives call for Trudeau to testify at committee on WE Charity deal

Ethics Commissioner Mario Dion is already investigating whether Trudeau violated the Conflict of Interest Act

Beat the heat this summer with pop-up spray parks

Starting next week, spray parks will be popping up in neighbourhoods across… Continue reading

Genetic detectives begin work to trace spread of COVID-19 in Canada

The kinds of genetic technology being used for this project did not exist when SARS hit Canada in 2003

Quebec police continue search for father, one day after missing girls found dead

Bodies were found in a wooded area of Quebec City suburb

11 rafters rescued from Red Deer River

Red Deer RCMP rescued a party of 11 river rafters Saturday afternoon… Continue reading

QUIZ: Are you ready for a summer road trip?

How much do you really know about roads, motor vehicles and car culture? Take this quiz to find out.

Canmore RCMP respond to multiple hiking injury calls this weekend

EMS and RCMP responded to three separate and unrelated hiking accidents in Kananaskis Country.

You can’t put a price on memories

Some people would rather buy something than sell something. Some people are… Continue reading

Masks and gloves: Elections Saskatchewan preparing for pandemic election

REGINA — Elections Saskatchewan estimates it will need 400,000 face masks and… Continue reading

Quebec police say they found 2 bodies in St-Apollinaire during search for 2 girls

SAINT-APOLLINAIRE, Que. — Quebec provincial police continue to search for the father… Continue reading

NHL commissioner Gary Bettman, NHLPA chief Don Fehr reflect on RTP, CBA deals

Gary Bettman and Don Fehr finally have a chance to catch their… Continue reading

NHL’s road to Edmonton and Toronto featured plenty of obstacles

Since early March, the novel coronavirus has affected almost every decision facing… Continue reading

Florida sets record week for coronavirus deaths

FORT LAUDERDALE, Fla. — Florida’s coronavirus death rate rose again Saturday, setting… Continue reading

Trump’s defiant help for Stone adds to tumult in Washington

WASHINGTON — President Donald Trump’s intervention into a criminal case connected to… Continue reading

Most Read