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Manufacturing needs ‘certainty’ in Trump's trade war: economist

Scott Saloway
·Producer
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The latest ISM report on manufacturing continues to send shockwaves through the markets, pushing the Dow, S&P 500 and Nasdaq lower for a second day.

Chad Moutray, chief economist at the National Association of Manufacturers, tells Yahoo Finance’s “The First Trade” that the slowdown in manufacturing is partly because of pressures from slowing economies in key trading partners. But he also cites the Trump administration’s ongoing trade war with China, and Congress holding up the USMCA trade deal with Mexico and Canada.

“Manufacturers really need certainty right now. We need USMCA passed. We need some type of deal made with China,” Moutray said. “We certainly recognize that China has not always been a fair trading partner, and we really want some certainty in terms of what that negotiation will look like.”

The ISM Purchasing Managers Index showed manufacturing in September slowed to its lowest level since June. It was the second consecutive month of contraction. Export orders fell to their lowest level since March 2019. A sharp decline in manufacturing exports are a key part of that, down about 2.5% so far this year.

Workers at the Hollywood Bed Frame Company attend an event to mark the company's upcoming expansion which will double the manufacturer's workforce, adding 100 new local jobs, at the company's factory in Commerce, California, seven miles (11 km) southeast from downtown Los Angeles, April 14, 2017. Hollywood Bed Frame says it is one of a number of American companies benefiting from a commitment Walmart made last year to source an additional $250 billion in products made, assembled or grown in the US. / AFP PHOTO / Robyn Beck        (Photo credit should read ROBYN BECK/AFP/Getty Images)
Workers at the Hollywood Bed Frame Company near Los Angeles, April 14, 2017. (ROBYN BECK/AFP/Getty Images)

“Clearly we’re seeing demand and production slow down pretty significantly,” Moutray said. “When you look around at most of the trading markets we’re selling into, most of them are in contraction. That presents a huge red flag for manufacturers overall.”

However, he doesn’t expect the manufacturing contraction to spill over into the larger economy in terms of an overall recession. Other areas, including consumer spending, remain strong.

“The consumer continues to prop up the economy,” he said. “As long as the consumer continues to spend, I don’t see us going into a larger recession, although clearly manufacturing is softening or contracting right now and that’s quite a worrisome sign.”

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AMS October 10
AMS October 10