The US manufacturing sector grew at its slowest rate since 2009 in May, according to survey data released today, in a sign that the world’s biggest economy is losing momentum.
Tariffs were widely blamed for dampening demand and increasing costs, helping bosses’ confidence about future output fall to the lowest level since 2012, the latest survey from data firm IHS Markit has shown.
The news comes just days after US President Donald Trump announced he would be slapping a five per cent tariff on all Mexican exports from 10 June. He said the move was to try and force Mexico to reduce the number of migrants going to the US.
Global investors have been jittery since Trump ratcheted up tariffs on $200bn of Chinese goods from 10 per cent to 25 per cent last month. Global stock markets fell sharply in May as investors fled to safer assets.
Today’s IHS Markit manufacturing purchasing managers’ index (PMI), a closely-watched gauge of how the sector is performing, fell to 50.5 in May from 52.6 in April. This was the lowest reading since the fallout from the financial crisis in September 2009.
The data firm said the sector has slowed considerably in the second quarter so far compared to the first three months of the year.
Manufacturers signalled the first decline in new orders since 2009 in May, while new business from abroad contracted for the first time since July 2018.
Chris Williamson, chief business economist at IHS Markit, said: “New orders are falling at a rate not seen since 2009, causing increasing numbers of firms to cut production and employment.”
While tariffs have weakened demand and pushed costs higher, Williamson said, “producers and their suppliers often reported the need to hold selling prices lower amid lacklustre demand.”
“While this bodes well for inflation, profit margins are clearly being squeezed as a result,” he said. “Production is set to act as a further drag on GDP, with factory payroll numbers likewise in decline.”