Economy

U.S. Manufacturing is Headed Toward Recession

JM Ashby
Written by JM Ashby

Manufacturing activity in some of the world's largest manufacturing sectors from China to Germany has already been in recessionary territory for months and it was bound to catch up to us at some point.

There are some small signs that we're not entirely there yet, but American manufacturing has technically entered a recession due to temporary factors.

From MarketWatch:

Industrial production fell 0.2% in July, the second drop in the past four months, the Federal Reserve reported Thursday.

Wall Street economists had forecast a 0.2% gain, according to a MarketWatch survey. [...]

The factory sector is in a technical recession, with output suffering small declines for the past two quarters. The July data do not point to any quick recovery. Renewed trade tension with China is not expected to help. For now, the consumer is the engine of U.S. economic growth.

“Manufacturing is in recession, but not in meltdown,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Production fell in July because Hurricane Barry forced the temporary closure of drilling operations in the gulf of Mexico, meaning manufacturing output could recover in August, but that's not necessarily comforting as output for the entire year is growing at a rate of just 0.5 percent. That's dangerously close to recession and all it will take is another chaotic flub from Trump to push the industry over the edge.

With some of Trump's new tariffs locked in for September 1st and with more tariffs coming on December 15th -- and with China likely retaliating on both occasions -- I think we can see where this is headed. If the American manufacturing sector isn't entirely in a recession yet, it could be by the end of the year.

  • muselet

    Remember during the 2016 primary season, every R promised his Economic Plan, Now With Even More Free Market! would lead to 3% annual growth?

    Remember Donald Trump declaring his Economic Plan, With Trump Magic! would lead to “4, 5 even 6 percent” annual growth?

    I wonder who the administration will try to blame for the manufacturing sector taking a massive dump like this.

    –alopecia

  • Draxiar

    Pay down your credit cards.

    • Tony Lavely

      Good advice for any time, but likely critical now.