Economy

Manufacturing Activity Falls to 10-Year Low

JM Ashby
Written by JM Ashby

Manufacturing in the United States is not yet contracting, but it currently is in much of the industrial world where activity has fallen below a level that indicates growth.

The Purchasing Managers' Index (PMI), which measures orders, employment, exports, and stocks among other things, has fallen to the lowest level since 2009 in the United States while other countries have dipped into recessionary territory.

The U.S. Manufacturing Purchasing Managers’ Index fell by more than two-points to 50.5 in May, the lowest level since Sept. 2009, according to IHS Markit. New orders contracted for the first time since August 2009.

The overall index has fallen by almost six points over the last year.

“May saw U.S. manufacturers endure the toughest month in nearly 10 years, with the headline PMI down to its lowest since the height of the global financial crisis,” said Chris Williamson, economist at IHS Markit. Manufacturing “production is set to act as a further drag on GDP.”

While a PMI of at least 50 indicates growth in manufacturing, the United States is just close enough at 50.5 for one of Trump's many whims to tip the balance and cause a contraction in American manufacturing. Trump's upcoming tariffs on all goods imported from Mexico could be all it takes.

South Korea and China have seen their PMI fall to 48.4 and 49.5 respectively, while Germany's PMI has fallen to 44.9.

A separate reading of the Purchasing Managers' Index released by the Institute for Supply Management shows manufacturing dropping to its lowest level since 2016, not 2009.

The Institute for Supply Management’s purchasing managers index declined to 52.1 from 52.8, missing the median forecast of 53 in Bloomberg’s survey but holding above the 50 mark that indicates expansion. Three of five components declined, including production, inventories and supplier deliveries, according to a report Monday. Eleven of 18 manufacturing industries reported growth.

It's not clear which measure of manufacturing activity is more accurate, or why the two measures are so different, however both reports show a sharp decline that began last summer after Trump dramatically escalated his trade war with China, Canada, and Mexico.

It is clear that things are headed in the wrong direction and that Trump is primarily responsible for it.

  • Badgerite

    Correction. The gop is responsible for it because they are responsible for trump.

  • Draxiar

    Recession is Coming.
    Anyone want to place bets on who trump will blame when the economy sours?

  • muselet

    It’s not as if this was particularly unexpected, given Donald Trump’s lack of understanding of economics. I’m only surprised it took this long for the economy to start sinking.

    The Rs will start blaming the Ds for the falling PMI as soon as general-election campaigning begins.

    –alopecia

  • gescove

    That can’t be right… Crisis Manufacturing is WAY up in this administration.