The ongoing trade war with China helped push business activity growth in the US to a three-year low in May, according to widely-watched survey released today.
Output in manufacturing and services was held back by lower demand and subdued growth of new orders, which firms commonly attributed to global trade tensions, the survey from data company IHS Markit revealed.
The news comes after the International Monetary Fund (IMF) today warned that the trade conflict, which saw the US ratchet up tariffs on $200bn (£158bn) worth of Chinese goods to 25 per cent, will “jeopardise” 2019 global growth.
Fears over the trade war intensified today following the decision by Japan’s Panasonic to cut back on business with controversial Chinese tech giant Huawei.
Panasonic became the latest company to fall in line with the Trump administration’s crackdown on the firm, which is part of its trade conflict with China. UK chip designer Arm has paused its dealings with Huawei this week.
The flash US composite purchasing managers’ index (PMI), an indication of the health of the private sector, fell to 50.9 in May from 53 in April, today’s survey showed. A score of over 50 indicates growth.
US private sector firms grew less optimistic about a rise in output over the coming 12 months, with trade tensions weighing on the minds of many.
Worryingly for the US, the service sector struggled alongside the manufacturing sector in May, with intense competition seeing outstanding business fall.
Chris Williamson, chief business economist at IHS Markit, said: “Growth of business activity slowed sharply in May as trade war worries and increased uncertainty dealt a further blow to order book growth and business confidence.”
“The slowdown has been led by manufacturing, but shows increasing signs of spreading to services,” he said. “With the service sector’s performance being a key gauge of the health of domestic demand, this broadening-out of the slowdown poses downside risks to the outlook.”
Williamson said: “Trade wars remained top of the list of concerns among manufacturers, alongside signs of slower sales and weaker economic growth both at home and in key export markets.”