The world’s factories are hurting due to the trade war. That much is clear.
US manufacturing activity contracted for the second month in a row in September, bucking expectations for a slight recovery. The Institute for Supply Management’s closely-watched manufacturing index dropped to 47.8, its lowest level since June 2009.
An organization that makes machinery cited softening demand and lowered backlogs. “The tariffs have triggered a lot of confusion in the business,” one electrical equipment, appliance, and components manufacturer stated.
Not mentioned, as my Business colleague Matt Egan points out: The Federal Reserve, which President Donald Trump shortly said was to blame.
A strong dollar indeed makes it tough for US companies to export their goods. However, analysts argue that it is the trade war, not the Fed, that’s contributing to the dollar’s strength. Nervous concerning the global economic slowdown and trade policy, investors are dumping foreign currency in favor of the dollar, Matt writes.
The US manufacturing information instantly sparked chatter about rising recession dangers. That is in part because the state of the global industry is so woeful, raising questions on how long the services sector can proceed to compensate for losses.
Germany’s leading economic research institutes on Wednesday slashed their forecasts for economic growth for this year and subsequent, blaming in part “the falling worldwide demand for capital goods.” The German GDP growth for the year is now forecast at merely 0.5%. The last time Europe’s biggest economy carried out weaker than that was through the global recession in 2009.
“German industry is now in recession, and that is now also impacting the service providers catering to these companies,” mentioned Claus Michelsen of the German Institute for Economic Research.