This trifecta of challenges worries analysts and economists that the manufacturing sector may contract for the third third month of October. Lower production from US factories could reduce US GDP growth in the third and fourth quarters.
American industry is already hurting. US-China trade tensions have weighed on global demand and spending. A trade agreement might help, but it would not alleviate the impact of the ongoing GM ( GM ) strike or the seven-month basic support of Boeings ] ( BA ) workhorse jet.
GM and Boeing are two of the largest industrial companies in the United States, and their fight will make a bulge in October factory activity.
"The full impact of the GM strike will be felt in the October data," said Tom Derry, executive director of the Institute of Supply Management. When the strike will be resolved remains unclear.
"I would not expect us to be out of a confluent territory in production, and the GM situation would make the number that would have been a little worse," Derry added.
The GM strike, in which 50,000 workers left the job
in mid-September, is still not resolved. It costs the company about $ 90 million a day. The disturbance is also ripped through the car manufacturer's supply chain. Some 1
0,000 US companies provide GM products and services, such as car seats and computer chips. Many have had to cut production because of the work stoppage.
Economists asked by Refintiv have average expectations of 47.8 for the Institute of Supply Management's October manufacturing industry – down from last month. (A reading below 50 indicates that the industrial sector is about to collapse.) The index, which will be published next November 1, has fallen for two months in a row.
GM's strike may also appear in the October Job Job Report. With nearly 50,000 workers not receiving their regular wages, it could even have an impact on consumer spending during the holiday season.
Meanwhile, Boees scaled back production of 737 Max on its export contribution, as many of the grounded jets were destined for foreign markets.
The ground support already shaved a quarter percentage point of GDP for the second quarter, estimates Michael Pearce, US economist at Capital Economics. This move may continue towards the end of the year. In July, the company said it might be necessary to stop production of the jet, which was founded in March after two fatal accidents.
The New York Federal Reserve's forecast model estimates GDP growth of 1.3% in the fourth quarter, compared to 2% in the third quarter.
Although the American consumer has largely remained strong throughout the year's turbulence, the trade war has also begun to emerge in confidence surveys. Overall, this did not bode well for consumer data in the fourth quarter. Although Friday's survey of consumer sentiment from the University of Michigan was better than expected, with fewer survey participants mentioning the trade war, nearly a third of them still raised concerns.
But unlike the trade war, the GM strike could be resolved relatively soon, leading to factory activity declining. So its negative impact on the industrial sector or GDP data can be short-lived.