US manufacturing sector contracts fourth month in a row

Economists think the slowdown will only get worse
Copyright 2019 CNN
The American economy's long run of expansion is slowing down.

The American manufacturing sector keeps shrinking. The trade war is heating up again. That’s not a good recipe for investor confidence: The US stock market is in the red on Monday

The Institute for Supply Management reported activity at America’s factories contracted for a fourth-straight month in November. The purchasing managers’ index was only 48.1, compared with the economists’ consensus forecast of 49.2. Any reading under 50 denotes a contraction.

So much for the fourth quarter stabilization that many economists had expected.

“A bounce was expected after the end of the GM strike and amid some easing in U.S./China trade tensions,” said Sal Guatieri, senior economist at BMO. The worse-than-expected data also followed some improving manufacturing data from China and Europe, which suggested the sector might be stabilizing globally.

“Global trade remains the most significant cross-industry issue,” said Timothy Fiore, chair of the Institute for Supply Management’s Manufacturing Business Survey Committee.

Survey respondents cited ongoing economic uncertainty and confusion over the trade relationship with China. Some said the current conditions led them to revise their capital-spending plans.

Making matters worse, October construction spending also sharply underperformed forecasts, falling 0.8% when a 0.4% bump was expected.

Escalating trade-spooked manufacturers’ fears, on Monday, President Donald Trump renewed the threat of import tariffs on steel and aluminum from Brazil and Argentina, citing a “massive devaluation of their currencies.”

It is true that both the Brazilian real as well as the Argentine peso have fallen in value against the US dollar this year. But whether it was a case of intentional devaluation to gain an advantage in commerce is another question. The real is down 8% and the peso has plummeted more than 37%, not least because of its turbulent political and economic situation.

All this is weighing on US stocks Monday. After a slightly higher open, major stock indexes are squarely in the red around midday. The Dow is down nearly 230 points, or 0.8%. The broader S<>&P 500 is also down 0.8%, while the Nasdaq Composite slipped 1.3%./p