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The manufacturing sector contracts for the first time in almost a decade



U.S. producer growth slowed to its lowest level in nearly 10 years in August, the latest sign that the trade war could exacerbate the economic downturn.

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

Any reading below 50 signals a contraction. The survey is an initial reading for the month of August. The final figure will be released on September 3.

"Production companies continued to feel the impact of slower global economic conditions," Mark Moore, CFO of Markit, said in a statement Thursday. "August's survey data give a clear signal that economic growth has continued to soften in the third quarter."

Production had been one of the big winners during the Trump administration, but the look-for-tat tariffs in the US-China trade war have taken a large chunk of the sector. US manufacturing activity slowed to almost three years in July, based on data from the Institute for Supply Management.

But this recent survey showed that new orders received by manufacturers fell the most in 1

0 years, while data also showed export sales were reduced to the lowest level since August 2009.

Investors track PMI metrics to get early indicators of where the economy is headed. After the Markit reading, the shares fell and the yield curve inverted.

"The most complex aspect of the latest data is a slowdown in new business growth to the weakest in ten years, driven by a sharp loss of momentum in the service sector," Moore said. "Survey respondents commented on headwinds from dampened corporate spending such as softer growth expectations at home and internationally encouraged tighter budgeting."

Manufacturers continued to reduce inventories this month, which is mainly attributed to concerns about the demand outlook, cf. Markit.

The overall economy is still showing weak expansion due to service industry assistance. US overall business growth also fell to a three-month low since the seasonally adjusted IHS Markit Flash. The US composite PMI print index fell to 50.9 in August, signaling a "renewed slowdown" in the rate of US business growth, says Markit.

There are several measurements of production activity coming next week with the Dallas Fed mood on Monday and the Chicago PMI on August 30.


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