One crucial piece of information that investors were anticipating was key U.S. manufacturing data. While many were trying to stay optimistic, it wasn’t entirely surprising to see that when the data was released on Thursday, it was rather disappointing to say the least.
In response, most major indexes stalled in light to this information as this weakness in the manufacturing sector raises fresh worries over the state of the economy.
The Wall Street Journal went on to report that a key measure of manufacturing activity, the HIS Markit’s flash manufacturing purchasing managers index, came in at 49.9 for the month of August. This was a decline from the previous month, where the index was at 50.4. August’s figures also happens to be the lowest point seen since 2009 and are a warning sign that manufacturing activity, which is classified as expanding when above 50, has actually contracted over the course of the month.
“The data raises a red flag that manufacturing is contracting. The U.S. consumer remains abundantly strong while manufacturing has been taking a hit amid increasing uncertainty over trade with China,” said Carter Henderson, a portfolio specialist at Fort Pitt Capital Group. “Manufacturing companies continued to feel the impact of slowing global economic conditions. August’s survey data provides a clear signal that economic growth has continued to soften in the third quarter,” added Tim Moore, economics associate director at Markit according to CNBC.
Manufacturing has been one of the main areas that the Trump administration has focused on growing alongside domestic energy output. However, the ongoing trade tensions between the U.S. and China has hurt the sector hard as companies struggle to deal with the constantly changing tariffs between the two nations.
At the same time, weak data from a European economic powerhouse, Germany, also exacerbated fears that weak international economic growth could be spilling over into America. It certainly hasn’t helped that the yield of the 10-year Treasury note fell again below the two-year note yields again, an inversion that happened again last work much to the fear of investors.
However, the overall U.S. economy is still showing signs of a slight expansion if only because of the service industry, which has grown to offset the decline in other areas. U.S. overall business activity growth has also declined, reaching a three-month low.
Most major indexes fell slightly in response to this. The Dow Jones Industrial Average initially fell on the data, although it did end the day up a measly 49.51 points. The tech-based Nasdaq composite fell by 28.82 points, or 0.4 percent, while the S&P 500 just dipped by only 1.48 points, or 0.1 percent.
The news also had an impact on the prices of industrial commodities. In particular, copper ended up falling to a fresh multi-year low, sliding down 1.1 percent on Thursday to $2.557 per pound. Another key metal, iron, fell to a six-month low yesterday albeit on unrelated news.
While the markets often oscillate between optimism and fearfulness over the state of the economy, the current climate definitely is the most bearish it has been so far in 2019. This decline in manufacturing certainly isn’t helping in this regard.
