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US manufacturing sector contracts for first time since 2009, survey says

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US manufacturing sector contracts for first time since 2009, survey says
AVERY ISLAND, LA - AUGUST 21: A worker monitors the bottle production line at the Tabasco hot sauce factory on the grounds of Avery Island on August 21, 2019 in Avery Island, Louisiana. Avery Island, a dome of salt surrounded by marshes near the southern Louisiana coast, is where the iconic Tabasco sauce has been made for the past 150 years. Like much of southern Louisiana, coastal marshland around Avery Island is disappearing at a rapid pace and the island is losing about 30 feet of surrounding protective marshland per year. As land gradually retreats from the area, the island becomes more susceptible to flooding from severe storms. (Photo by Drew Angerer/Getty Images)

The US manufacturing sector contracted for the first time since the financial crisis in August, survey data showed today, in a sign that a global slowdown and trade tensions are damaging producers.

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A preliminary reading of the manufacturing purchasing managers’ index (PMI), a closely-watched gauge of the sector, fell to 49.9 in August from 50.4 in July. A score of under 50 indicates contraction.

The contraction will concern policymakers in the Trump administration, which has made it a central policy to bring back blue-collar jobs to the United States. 

It will also grab the attention of the interest rate-setting committee at the Federal Reserve, which many investors are hoping will cut interest rates to ease financial conditions amid a global slowdown and US-China trade war.

The sharpest fall in new orders in 10 years was largely to blame for the manufacturing sector’s weakness in August, according to data firm IHS Markit, who released the survey.

Survey respondents said the weak global economy had hurt exports and commonly cited a the car-making sector as having particularly weak sales.

Tim Moore, economics associate director at IHS Markit, said: “Manufacturing companies continued to feel the impact of slowing global economic conditions, with new export sales falling at the fastest pace since August 2009.”

He said that alongside signs of weakness in the service sector, the contraction in manufacturing “collectively point to annualised GDP growth of around 1.5 per cent”.

Read more: US Fed minutes show debate over cutting rates more aggressively

US factories cut down their inventory levels for the fourth month running in August due to concerns about future demand, IHS Markit said. 

(Image credit: Getty)