As economic indicators go, U.S. manufacturing data tends to draw a lot of attention, which is why no one was pleased yesterday when a new report pointed to a contracting manufacturing sector, defying rosier expectations.
The widely watched Manufacturing Business Survey from the Institute for Supply Management reported Tuesday that manufacturing unexpectedly dropped to 49.1 in August. Any number below 50 indicate the manufacturing economy is generally shrinking.
Economists agreed that the Trump administration’s trade war with China is the biggest factor dragging down the index.
“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.”
Chris Rupkey, the chief financial economist at MUFG Union Bank, added, “The U.S. trade war with the world has blown open a great big hole in manufacturers’ confidence. The manufacturing sector has officially turned down and is falling for the first time this year as the China tariffs and slowdown in exports has really started to bite.”
It’s entirely possible that these will prove to be inconsequential blips on the radar and that the economic recovery that began at the start of the decade will continue. It’s also possible that we’re seeing the initial indicators of an economic slowdown and a possible recession.
Donald Trump seems to realize that the latter would create a political crisis for him, which is why he’s taking swift action – not to alter his policies that aren’t working, but to lay the groundwork to blame others for the shaky economy.
The list of entities the president is pointing at is surprisingly long:
* It’s American businesses’ fault: Late last week, lashed out at “badly run and weak companies,” which he believes are struggling as a result of “bad management.” It’s not at all common for American presidents to complain indiscriminately about his own country’s private sector, but Trump is obviously unique.
* It’s the Federal Reserve’s and Jerome Powell’s fault: Trump has been almost hysterical in recent months when attacking the Fed, filled with board members he nominated, and its chairman, whom Trump chose for the job. “We don’t have a Tariff problem … we have a Fed problem,” the president complained on Twitter last week. “They don’t have a clue!”
* It’s the media’s fault: A few weeks ago, Trump decided the “Fake News Media is doing everything they can to crash the economy.” As he sees it, it’s part of a conspiracy hatched by news organizations to defeat him, despite Trump’s other assertions that news organizations will make every effort to help him win in order to keep up readers, listeners, and viewers.
If more signs of trouble emerge, it stands to reason that the president will widen the aperture and start implicating the United Nations, hidden cabals, and Bigfoot.
The more obvious culprit – Trump’s misguided and poorly executed trade war – will be the one thing he overlooks.