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Manufacturing contracts are the first time in nearly a decade



Worker Creates Ford Explorer Car in 2020 at Chicago Ford Factory in Chicago, IL, June 24, 2019.

Camille Kruzanski | Reuters

U.S. Producer growth slowed to at least 10 years in August, the latest sign that trade warfare could intensify economic slowdown.

The US Manufacturing Index PMI (Purchasing Managers Index) was 49.9 in August, down from 50.4 in July and below the neutral threshold of 50.0 for the first time since September 2009, according to IHS Markit .

Any reading below 50 signals a shrink. The study is an initial reading for August. The final figure will be released on September 3.

"Manufacturing companies continued to feel the impact of a slowdown in global economic conditions," Tim Moore, associate director of economics at Markit, said in a statement Thursday. "Data from the August Survey give a clear signal that economic growth continues to soften in the third quarter."

Production was one of the biggest winners during the Trump administration, but tit-for-tat rates in the US and China the trade war took a big bite out of the sector. Manufacturing activity in the United States slowed to a near three-year low in July, based on data from the Institute for Supply Management.

But this new study showed that new orders received from manufacturers declined most in 1

0 years, while data also showed export sales were at their lowest levels since August 2009.

Investors track PMI's readings to get early indicators of where the economy is headed. After reporting Markit the stocks fell and the yield curve turned.

"The most concerning aspect of the latest data is the slowdown in new business growth to its weakest in a decade, driven by a sharp loss of momentum in the services sector," Moore said. "Respondents to the survey commented on the feedback from reduced corporate spending as a softer expectation for growth at home and internationally encouraged tighter budgetary settings."

This month, manufacturers continued to reduce their inventories, which mainly contributed to concerns about demand forecasts, according to Markit.

The general economy is still showing a slight expansion due to assistance from services. Growth in overall US business activity also fell to a quarterly low after the seasonally adjusted IHS Markit Flash US Composite PMI Output Index dropped to 50.9 in August, signaling a "renewed slowdown" in the pace of private business activity growth sector in the US, said Markit.

There are several indications of production activity coming up next week with the sentiment of the Dallas Fed on Monday and the Chicago PMI on Friday.


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