Listen: Sharp US manufacturing contraction fuels global economic gloom

"More bad news for manufacturing a global slowdown in the sector worsened in September and the World World Trade Organization said today that slowing trade could impact investment and jobs here in the US manufacturing contracted for the second month in a row hitting its lowest level since June of two thousand nine stocks slumped on that news starting the fourth quarter off on a down note. The Dow fell three hundred forty four points on Tuesday and all three major indexes lost more than a percent joining me now from Washington with more details is Wall Street Journal reporter Harry Tori Hurry it. Let's start with the global picture are and the World Trade Organization's prediction that slowing trade could have a broader impact how much of this has to do with the trade dispute between the US and China pull the WTO definitely pin this on the trade dispute or trade disputes in general it said that it expects flows of goods across borders to grow by just one point two percent this year amounts so that's down from three percent in two thousand eighteen and if that is correct it would be the lowest annual increase since two thousand nine the WTO did say that this will depend on a return to more took took normal trade relations and it said that fresh tariffs could produce a destructive cycle of recrimination so this definitely is I think reflecting what's going on in in terms of trade will between the US and China that has really dented confidence in a lot of places and we've seen in the data that is having big impact around the world now and what about here in the the US economists had expected manufacturing to bounce back in September but we saw the opposite a second straight month of a slowdown. How concerning is that. Yeah yeah that came as a kind of a surprise this is a survey of purchasing managers and it was expected to take slightly highest sort of back into expansion territory in September in fact what what's happened is that the index fell to forty seven point eight that was from forty nine point one in August so this latest reading is the lowest since June two thousand nine and it definitely represents a continuation of the slowdown that we saw in August for the first time in about three years so this is definitely worrying and the stock market reacted acted it shut it about one percent following the news so people are definitely sitting up and paying attention to this on the other. Hand you know this is one piece of data. This index is formed of what purchasing managers as saying and they clearly clearly companies worried about exports and they're worried about you know what's going to happen with manufacturing is it going to plunge on June cliff into an abyss but this is neat one day two point and we did have another manufacturing index out today and that was totally fine so you know it. I think think should be taken with a grain of salt but why does a slowdown in manufacturing seemed to have such an outsize effect on people's perception of the economy. What's the practical impact of the manufacturing sector for the broader economy. Will the manufacturing sector you right in that it doesn't it doesn't hold a huge share of jobs like far less for instance than the services sector but it acts is kind of a bellwether for the broader economy and what we've seen with the trade war is that of course exports get hit with with trade tensions also a strong dollar is not helping the situation of US exporters when things like that happen how companies respond while potentially down the line if they're not exporting saying they don't make any money they might end up cutting jobs and these things have kind of a ripple effect you know that could it could hurt sentiment it can hurt confidence that leads people to spend less that needs more employers to cut jobs so the the worry is that this although trade and manufacturing do make up a relatively small share of the US economy. It has quite a lot of weight because it's sort of a bellwether and nobody wants you know a downward spiral to start based on what's going on in terms of global trade. That's The Wall Street Journal's Harriet Tori joining me from Washington. Thank you so much. Thanks"

WSJ What's News

Sharp US manufacturing contraction fuels global economic gloom

WSJ What's News

2 months ago

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