American manufacturing has been treading water slightly above a level that indicates growth (a reading of 50 percent of better) even while manufacturing in the rest of the world has been submerged in a recession, but that time is now firmly behind us.
Manufacturing had already dipped to a level that indicates contraction, but that dip has grown and manufacturing is now at its lowest point since the Great Recession according to the Purchasing Managers’ Index.
The U.S. manufacturing Purchasing Managers’ Index from the Institute for Supply Management came in at 47.8% in September, the lowest since June 2009, marking the second consecutive month of contraction. Any figure below 50% signals a contraction.
The new export orders index was only 41%, the lowest level since March 2009, down from the August reading of 43.3%, ISM data showed.
“We have now tariffed our way into a manufacturing recession in the U.S. and globally,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
There is no mystery to this very Trumpian recession.
A global slowdown in demand may have caught up to the United States at some point in any case, but Trump has done virtually everything a president can do to move the date forward. And actually, Trump has done things that no previous president has done. He's done things you're explicitly not suppose to do, like intentionally depressing demand by imposing tariffs because a television pundit told you it was a good idea.
Trump imposed tariffs on foreign metal last summer which directly hit the vast majority of American manufacturers that use foreign metal as input to make their own products. That also filtered upward to other manufacturers that use those metal products made with foreign metal.
Trump followed up his tariffs on metal with his unending trade war on virtually all goods imported from China, the bulk of which includes industrial goods and products that are used in manufacturing.
Retaliatory tariffs imposed in response to Trump's tariffs have also hit overseas demand for American-made goods.
Trump made a recession inevitable and there's no reason to think conditions will improve anytime soon. It's not as if phantom demand will suddenly spring from the shadows and even an end of Trump's trade war (which few people expect to see) may not reverse the current trend.
If the holiday season does not revive demand for manufactured goods, it may be lights out for all of 2020.