The US Isn't The Only Nation With Concerning Manufacturing Data

Stocks sagged Tuesday on disappointing manufacturing data as economists began to worry the United States may be joining Europe and Asia in an industrial slowdown that new figures showed is continuing.

The Institute for Supply Management said Tuesday that its U.S. Purchasing Managers Index survey, or PMI, fell in September to its lowest point since mid-2009 and indicated supply chain managers see a contraction in manufacturing activity for a second straight month.

U.S. stocks fell nearly a percentage point after the data was reported and continued lower through the day.

“Comments from the (manufacturer supply managers) panel reflect a continuing decrease in business confidence,” said Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee. “Overall, sentiment this month remains cautious regarding near-term growth.”

Trade War Blamed

The Sino-American trade war is shouldering most of the blame. 

“Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019,” said ISM’s Fiore. 

Among the comments from participants in the ISM survey:

“Continued softening in the global automotive market. Trade war impacts also have localized effects, particularly in select export markets," said a chemical company manager.

Just for the record: US manufacturing now has two consecutive quarters of decline. Two quarters of decline is definition of recession. US manufacturing is now in recession.
- it's not the Fed
- Fed rates are at historic lows
- the Fed can't fix tariffs
- #ItsTheTariffsStupid

— John Oberlin (@OMGno2trump) October 1, 2019

“Chinese tariffs going up are hurting our business. Most of the materials are not made in the U.S. and made only in China," added a food and beverage company manager.

Or, as Peter Boockvar, chief investment officer at Bleakley Advisory Group, told CNBC: “We have now tariffed our way into a manufacturing recession in the U.S. and globally."

Europe, Asia, Already There

U.S. investors were likely reacting primarily to concerns about the domestic economy. But the lessening optimism here follows what the British, Europeans and Asians have been watching for a few months: an ongoing slump. 

Manufacturing PMIs in Europe were also down in September, but they have been for some time.

global manufacturing confidence shows no rebound
• Japan tankan tanked
• Asian PMIs weakened
• core European PMIs into the abyss
• Germany 41.7
• peripheries sucked under water
• Austria 45.1, Swiss 44.6, Czech 44.9, Poland 47.8
• Russia PMI bear-trapped 46.3

— Kai (@MacroTechnicals) October 1, 2019

In the United Kingdom, factory activity has fallen for five straight months amid its uncertainty over Brexit.

Data from Japan showed manufacturing sentiment at its lowest level in more than half a decade.

Germany has watched manufacturing — led by slumping car sales — decline, and economists there have warned a recession may already be underway. 

US Less Reliant On Manufacturing

One possible difference that could insulate the U.S. from some of what is plaguing Europe and Asia: a lesser reliance on manufacturing. 

While manufacturing activity has contracted in the U.S., it accounts for just over 10% percent of the country’s gross domestic product, and the ISM report noted the overall economy continued to grow in September for the 125th straight month.

Manufacturing employment is at an all-time low in the United States, with fewer than 1 in 10 jobs tied directly to the industrial economy.

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