US-China trade war could slow global manufacturing activity into start of 2020, economists warn

China’s manufacturing activity contracted for a fifth straight month in September, while Germany and the United States dropped to their lowest levels since June 2009

World Trade Organisation also slashed its global trade growth forecast for 2019 to 1.2 per cent, more than half of its projection of 2.6 per cent earlier in April

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The Institute for Supply Management’s (ISM) purchasing managers’ index (PMI) for US manufacturing sank to 47.8 in September, the lowest since June 2009, marking the second straight month of contraction. Photo: AFP

Published: 7:30pm, 4 Oct 2019Updated: 11:02pm, 4 Oct 2019

As manufacturing data from China, the United States and Europe weakened to record levels in September, economists argued that a downward trend could be expected to continue until at least the first quarter of 2020.

Manufacturing activities across China, the US and Germany have been contracting continuously in the last few months amid uncertainty caused by the protracted trade war between Beijing and Washington, with data from September released this week further emphasising the issues faced by the global economy.

China’s manufacturing activity has now contracted for five consecutive months, while readings for both Germany and the US dropped to their lowest levels in a decade.

“I think it’s pretty clear that the global economy will continue to suffer in the last quarter of the year, and possibly into the first quarter of next year,” said Neil Shearing, chief economist at Capital Economics.

I think it’s pretty clear that the global economy will continue to suffer in the last quarter of the year, and possibly into the first quarter of next year

Neil Shearing

The Institute for Supply Management’s (ISM) purchasing managers’ index (PMI) for US manufacturing sank to 47.8 in September, the lowest since June 2009, marking the second straight month of contraction.

PMI is a gauge of sentiment among supply chain managers, with a reading below 50 indicating a sign of contraction. In the survey, manufacturers are asked to provide a view on business activities such as export orders, purchasing, production and logistics.

“Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019. Overall, sentiment this month remains cautious regarding near-term growth,” said ISM chair, Timothy Fiore.