Unless policy makers reverse course and start adopting a more business-friendly approach, a further global slowdown or even a recession is more likely than not in 2019. The Washington Post/Getty Images photo by Jabin Botsford.
US economy no immune from global slowdown
By John Kemp
LONDON, Jan 3 (Reuters) – US manufacturers reported the broadest slowdown in growth last month for more than a decade, as the trade conflict with China, falling equity prices and increasing uncertainty finally started to take a toll on the economy.
The Institute for Supply Management’s purchasing managers’ index slumped by 5.2 points in December from the previous month, the largest monthly fall since October 2008.
Manufacturers reported increases in orders, output, employment and inventories, indicating the sector continues to expand, but at a much slower rate than before, according to survey results published on Thursday.
The new orders component slumped by 11 points and remained barely above the 50-point threshold that divides expanding activity from a contraction, suggesting the loss of momentum could extend into early 2019.
Major US equity indices have been trending lower for months, suggesting investors were anxious about the earnings outlook, even as the purchasing managers survey continued to point to strong expansion.
That contradiction has now been resolved – with the decline in the survey results confirming the signal coming from the equity markets.
Until recently, the United States had appeared immune to the slowdown in growth evident in most other major economies since the middle of 2018.
But the loss of momentum reported at the end of last year shows the economy is not immune from broader global trends.
The slowdown in the United States is consistent with other indicators suggesting a significant deceleration in global export orders and trade flows.
Oil prices and calendar spreads have been falling since October, as traders anticipate weaker consumption growth in 2019.
Through tariffs, sanctions and other actions that have heightened uncertainty for businesses, policymakers have taken the expansion for granted and pushed the global economy to the brink of a slowdown.
Unless they reverse course and start adopting a more business-friendly approach, a further global slowdown or even a recession is more likely than not in 2019.
John Kemp is a Reuters market analyst. The views expressed are his own.
(Editing by Mark Potter)