WASHINGTON, May 16, 2019 (BSS/AFP) – The US economy is showing more signs
of strain amid President Donald Trump’s multi-front trade war, with a sharp
slowdown in manufacturing and a pullback by American shoppers.
Some cooling was to be expected from the red-hot pace of the past year but
the drop-off in manufacturing — especially in the struggling auto sector —
was far worse than economists had expected.
President Donald Trump has repeatedly touted the strong first-quarter
growth figures as proof his economic policies and tough trade tactics are
producing results.
He cited its 3.2 percent growth rate as proof the United States could
weather the impact of his decision to more than double tariffs on $200
billion in Chinese goods to 25 percent as of May 10.
However, economists have long cautioned that the data include troubling
signs that could point to a coming slowdown, especially as the short-term
burst from the 2017 tax cuts fades away and higher tariffs bite.
US manufacturing declined sharply in April. More worrisome was the
economy’s total industrial output for the first three months of the year,
which was much lower than originally reported, according to Federal Reserve
data released Wednesday.
And retail sales fell 0.2 percent — the mirror image of the 0.2 percent
gain economists had instead predicted — which like manufacturing was
impacted by weak auto sales.
Amid the bitter dispute with China, with the pain reflected across in
multiple sectors, industrial output in the first quarter plunged 1.9 percent
compared to the same period of last year, according to the latest data,
revised from a dip of just 0.3 percent reported last month.
– ‘Manufacturing is struggling –
In April alone, total output fell 0.5 percent, driven by a decline of the
same magnitude in manufacturing, as vehicle production continued to slip.
Economists had been expecting a 0.1 percent gain in industrial production
for the month.
“In short, manufacturing is looking weak,” economist Jim O’Sullivan of
High Frequency Economics told AFP.
And the revised data show the sector is weaker than suggested by other
closely-watched manufacturing data that have suggested slower growth rather
than contraction.
“The trend in exports has certainly weakened, and likely not just because
of trade tensions.”
In the key manufacturing sector, industries that saw declines of more than
two percent compared to March included motor vehicles and parts, machinery,
and electrical equipment and appliances.
Manufacturing is 0.2 percent lower than April 2018, while total industrial
production remains 0.9 percent higher.
“What is clear is that manufacturing is struggling and, therefore, added
uncertainty and tensions over tariffs is particularly unhelpful at this
juncture,” RDQ Economics said in an analysis.
Mining output, which includes oil and gas, rebounded after three months of
declines, with a 1.6 percent increase in the month, while utilities output
fell 3.5 percent as heating demand declined with the warmer weather.
Industrial capacity in use in use in April continued its string of
declines, dipping to 77.9 percent from 78.8 percent due to a dip in
utilization for manufacturing, including another two-point decline in the
troubled auto sector.
Economists noted that the retail sales data can be volatile and some
expect a rebound in coming months but there are troubling elements.
“Consumers are showing some signs of weakness despite ongoing improvements
in the labor markets,” economist Diane Swonk of Grant Thornton said in a
research note.
And she cautioned that consumers “at the low end of the income strata are
particularly vulnerable to higher prices at the pump and the pending tariffs
on China.”