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WASHINGTON – The US economy is showing more and more signs of tension in President Donald Trump's multi-pronged trade war, with a sharp slowdown in manufacturing and a pullback by US buyers.
We were expecting some cooling from last year's frantic pace, but the decline in the manufacturing sector – particularly in the struggling auto sector – was far worse than economists had expected.
President Donald Trump has repeatedly reiterated the solid first-quarter growth figures as proof that his economic policy and rigorous commercial tactics are working.
He cited his 3.2% growth rate as proof that the United States could cope with the impact of its decision to more than double tariffs on the $ 200 billion worth of Chinese goods for reach 25% from May 10th.
However, economists have long warned that the data included worrying signs that could signal a future slowdown, especially as short-term tax cuts in 2017 decrease and tariffs rise.
Manufacturing in the United States fell sharply in April. More worrisome was the total industrial output of the economy for the first three months of the year, which was well below that reported originally, according to data from the Federal Reserve released Wednesday.
In addition, retail sales fell by 0.2% – as reflected by the 0.2% gain predicted by economists – which, like the manufacturing sector, was affected by weak consumer spending. automobile sales.
In the context of the bitter conflict with China, which hit many sectors, industrial production plunged 1.9% in the first quarter compared to the same period last year, according to the latest data, revised from a decrease of only 0.3% month.
In April alone, total output fell 0.5%, led by a similar decline in the manufacturing sector, as vehicle production continued to decline.
Economists were expecting a 0.1% increase in industrial output for the month.
"In short, the manufacturing sector looks weak," said Jim O. Sullivan, an economist at High Frequency Economics.
And the revised data shows that the sector is weaker than suggested by other closely monitored manufacturing data that suggested slower growth rather than contraction.
"The export trend is certainly weakened, and probably not just because of trade tensions."
In the key manufacturing sector, the vehicle, parts, machinery and electrical equipment and appliance industries were down more than 2% from March.
Manufacturing is 0.2% lower than in April 2018, while total industrial production remains above 0.9%.
"What is clear is that the manufacturing sector is in trouble and that, therefore, uncertainty and tariff pressures are particularly useless at this stage," said RDQ Economics in an analysis. .
Mining output, including oil and gas, rebounded after three months of declines, up 1.6%, while utilities fell 3.5%, as heating demand declined warmer weather.
Industrial capacity used in April continued its downward trend, going from 78.8% to 77.9%, due to a decline in manufacturing use, including a further two-point decline in the manufacturing sector. the automotive sector in difficulty.
Economists have noted that retail sales data may be volatile and that some expect a rebound in the coming months, but some elements are troubling.
"Consumers are showing signs of weakness despite steady improvements in the labor markets," said economist Diane Swonk of Grant Thornton in a research note.
And she warned that consumers "at the bottom of the income ladder are particularly vulnerable to rising pump prices and pending tariffs on China."
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