The US manufacturing sector contracted for the first time in three years, data on Tuesday showed, as the Us-china trade war weighed on the industrial economy and added to fears about slowing domestic growth.
The Institute for Supply Management’s index fell 2.1 percentage points to 49.1 last month, missing expectations for a reading of 51.1, according to economists surveyed by Thomson Reuters.
This marked the first time since August 2016 that the index fell below 50, indicating a contraction, and its lowest level since January 2016. The data “will undoubtedly add to fears that more weakness is ahead”, said Jim O’Sullivan, chief US economist at High-Frequency Economics.
The details of the report were ugly, with new orders, production and employment sub-indices all contracting last month. New export orders contracted for the second consecutive month and fell to their lowest since April 2009, when global trade was hit following the financial crisis.
“Respondents expressed slightly more concern about Us-china trade turbulence, but trade remains the most significant issue, indicated by the strong contraction in new export orders,” said Timothy Fiore, chief of the ISM manufacturing business survey committee. “Respondents continued to note supply chain adjustments as a result of moving to manufacture from China.”
Wall Street had already been lower on Tuesday amid uncertainty over the next steps in USChina trade negotiations as the latest batch of tariffs imposed by the world’s largest economies took effect on Sunday.
Stocks extended their losses following the manufacturing data, with the S&P 500 down 1 percent, while Treasuries extended their rally. The yield on the US 10-year fell 6.2 basis points to 1.4439 percent, while that on the two-year slid 7 basis points to 1.4360 percent. Yields move inversely to price.
Uncertainty around trade relations between Washington and Beijing has sharpened concerns about global growth.
