US manufacturing shrinks for the first time in 3 years, surprising economists who predicted an ongoing, slow expansion.
U.S. manufacturing contracted for the first time in three years, surprising economists who had predicted an ongoing, slow expansion.
“Manufacturing is on the front line of the trade war, and it’s getting creamed,” said Mark Zandi, chief economist at Moody’s Analytics. “The dark irony is the trade war was supposed to help manufacturing, but instead it’s pushed them under water.” Currently, manufacturing contributes a little over 10 percent of G.D.P., so a recession in manufacturing is not enough to trigger a full-blown economic downturn. But when combined with already slowing growth, tariffs driving up prices and dwindling income growth, the outlook is troubling, economists say.
“The concern would be if other businesses in other industries start to grow more cautious in their hiring, and unemployment starts to rise, then the rest of the economy is impacted and you’ll have a recession,” Zandi said. “If you look at the growth in average take-home pay, that’s dropped even more,” he said. “People are working fewer hours on average. And when you combine slowing pay growth with the very real hit to spending power the tariffs are going to are create, those are two more headwinds to consumer confidence.”
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