Signs of an impending U.S. economic recession due to Trump's trade war continue to mount with manufacturing activity decelerating faster than expected.
New data from information services firm IHS Markit reveals the U.S. manufacturing PMI (purchasing managers index) fell to 49.9 in August compared to 50.4 in July. This level was below the neutral 50.0 thresholds and is the first time since September 2009 the PMI has fallen below 50.
Any reading below 50 signals a contraction in manufacturing and signals a slowdown with the vital manufacturing sector. Economists said the PIM drop is the latest sign Trump's trade war is accelerating the U.S. economic slowdown and is bringing the U.S. economy closer to a recession.
The weak PMI means new orders received by manufacturers has plummeted the most in 10 years. IHS Markit data also shows export sales plunging to the lowest level since August 2009. Equally bad, U.S. manufacturing activity slowed to a nearly three-year low in July.
"Manufacturing companies continued to feel the impact of slowing global economic conditions," said Tim Moore, economics associate director at IHS Markit. "August's survey data provides a clear signal that economic growth has continued to soften in the third quarter."
Before Trump's ill-advised trade war against the world, U.S. manufacturing was a major motive force driving the economy forward. That acceleration has sputtered under the weight of Trump's tariffs.
"The most concerning aspect of the latest data is a slowdown in new business growth to its weakest in a decade, driven by a sharp loss of momentum across the service sector," said Moore.
"Survey respondents commented on a headwind from subdued corporate spending as softer growth expectations at home and internationally encouraged tighter budget setting."
IHS Markit said manufacturers continued to reduce their inventories in August, which was mainly due to concerns about the demand outlook.
The PMI reading for the services sector fell to 50.9 from 53.0 in July. This was below economists' expectation of 52.9.
Analysts said this drop was one of the most concerning aspects of the new data. It confirms new business growth slowed to its weakest level in a decade "driven by a sharp loss of momentum across the service sector."
Overall business activity growth in the U.S. also fell to a three-month low in August. The seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index fell to 50.9 in August.
IHS Markit said this drop indicates a "renewed slowdown" in the rate of U.S. private sector business activity growth.
