US Manufacturing at Decade Low at 2nd Straight Drop

A Puckett Machinery Company technician walks past a new heavy-duty Caterpillar excavator that awaits modification at Puckett Machinery Company in Flowood, Miss., on Sept. 18, 2019. On Tuesday, the Institute for Supply Management, a trade group of purchasing managers, issued its index of manufacturing activity for September. (AP Photo/Rogelio V. Solis)

WASHINGTON (CN) – The Trump administration’s trade war with China has walloped factories across the United States, with American manufacturing hitting its lowest level in 10 years this past September.

The gloomy numbers were announced Tuesday by the Institute for Supply Management, which reported this morning that manufacturing dropped 47.8% in September, a further decrease from the 49.1% rate recorded in August.

Any rate below 50% is indicative of a shrinking manufacturing sector overall.

Production also dropped 2.2% in September and employment rates decreased by 1.1%. New manufacturing orders rose, but only by 0.1%.

Though he called Tuesday’s ISM report “bad news for the economy,” Robert Scott, director of trade and manufacturing policy research at the Economic Policy Institute, also said it has little to do specifically with trade tensions between the U.S. and China that have dragged on for over a year.

“It has everything to do with the slowdown in the domestic and global economies,” Scott said in an email Tuesday. “Trade wars restrict imports and exports, so both can slow. But it’s the trade balance that matters for GDP, so those factors have little impact on the rate of growth of domestic GDP.”

Scott did emphasize, however, that the administration’s ongoing tariff threats —targeted at Mexico, China, the automotive industry and others — breed what he referred to as chaos. Simply put, this destabilizing effect makes businesses more reluctant to invest.

“Declining domestic Investment reduced U.S. GDP growth by 1.16 percentage points in the second quarter, which directly reduced demand for manufactured products such as machinery and equipment, and motor vehicles,” Scott added. “So, Trump’s chaotic trade policy may be contributing to the investment slowdown, which has hurt manufacturing.”

Among manufacturers that support the president, however, Trump’s trade war with China makes sense.

“China is trying to take over the world through manufacturing,” said Bob Jacobs, president of Chesapeake CNC Manufacturing Inc., a screw machine shop based on Maryland’s Eastern Shore. “The greatest superpowers in the world have the greatest manufacturing in the world, and if we don’t slow down China from manufacturing, they will dominate the world.”

Speaking over the phone Tuesday, Jacobs said the market instability that in turn has hurt manufacturing is the fault of the media.

“Trump’s trade war has brought back work to the U.S. and generated business for me and my colleagues, but the press starts spouting off about the election and it makes consumers worried,” Jacobs said.

While U.S. unemployment is low this year, forecasting firm Moody’s Analytics estimated in September that the administration’s trade war has resulted in some 300,000 less jobs being created in America when compared with likely employment levels had a trade war never been initiated.

Moody’s also noted that the hardest hit sectors were those in manufacturing, distribution, retail and warehousing.

American Composites Manufacturers Association, the world’s largest composites industry trade group, said the trade war with China has a been a “mixed bag.”

“We have seen onshoring of manufacturing in the composites industry such as the start-up of the Jushi glass fiber manufacturing plant in South Carolina,” American Composites Manufacturers Association president Tom Dobbins said in a statement Tuesday. “However, our manufacturers are seeing higher raw material costs driven by tariffs that are impacting their profitability and their ability to invest in new plant equipment and growth.”

Last year, manufacturing was “particularly strong” across all markets, but Dobbins noted that 2019 is shaping up to look more like 2017.

“Still growth, but less than 2018,” he said. “As we know, manufacturing has the highest multiplier effect for any sector in terms of overall economic impact. So, maintaining a strong manufacturing base is important to the growth of the overall economy.”

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