The Institute for Supply Management reported Thursday that manufacturing activity in the U.S. dropped to 57.7 in October after a 59.8 showing in September. Meanwhile, the Commerce Department reported that spending on new construction projects was unchanged in the month of September.
Both sets of data could be signs that the U.S.-China trade wars is starting to affect the economy. During a press conference after announcing that the Federal Reserve is instituting a third rate hike in 2018, Fed Chair Jerome Powell said that monetary policy would not be affected by trade wars until raw data reflects necessary change.
“I think if you look at the aggregate performance of the U.S. economy, it’s hard to see much happening at this point,” said Powell. “You can look at it the other way and ask ‘If all the tariffs that have been announced are applied, what would be the affect at the aggregate level?’ They’re still relatively small.”
“Until we see it in the numbers, it’s hard to say how one would react,” added Powell.
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An Refinitiv poll of economists forecasted the ISM manufacturing index to come in at 59 for the month of October. According to Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, demand is still strong despite the latest number falling below economists’ expectations.
“Demand remains moderately strong, with the New Orders Index easing to below 60 percent for the first time since April 2017, the Customers’ Inventories Index remaining low but improving, and the Backlog of Orders Index remaining steady,” said Fiore. “Consumption softened, with production and employment continuing to expand, but at lower levels compared to September.”
The unchanged figure in construction spending for September was reflected in a slide in spending on government projects. The trade wars have placed higher costs on land, labor and lumber, discouraging builders to undertake new projects.
U.S. President Donald Trump tweeted on Thursday that he “just had a long and very good conversation with President Xi Jinping of China,” signaling that trade negotiations with the second largest economy are moving forward positively. President Trump also mentioned that continued discussions will take place at the G-20 Summit.
Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had good discussion on North Korea!
— Donald J. Trump (@realDonaldTrump) November 1, 2018
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