US economy showing signs of strain amid escalating trade war
The US economy is showing more signs of strain amid President Donald Trump’s multi-front trade war, with a sharp slowdown in manufacturing and a pullback by American shoppers.
Some cooling was to be expected from the red-hot pace of the past year but the drop-off in manufacturing -- especially in the struggling auto sector -- was far worse than economists had expected.
President Donald Trump has repeatedly touted the strong first-quarter growth figures as proof his economic policies and tough trade tactics are producing results.
He cited its 3.2 percent growth rate as proof the United States could weather the impact of his decision to more than double tariffs on $200 billion in Chinese goods to 25 percent as of May 10.
However, economists have long cautioned that the data include troubling signs that could point to a coming slowdown, especially as the short-term burst from the 2017 tax cuts fades away and higher tariffs bite.
US manufacturing declined sharply in April. More worrisome was the economy’s total industrial output for the first three months of the year, which was much lower than originally reported, according to Federal Reserve data released Wednesday.
And retail sales fell 0.2 percent -- the mirror image of the 0.2 percent gain economists had instead predicted -- which like manufacturing was impacted by weak auto sales.
Amid the bitter dispute with China, with the pain reflected across in multiple sectors, industrial output in the first quarter plunged 1.9 percent compared to the same period of last year, according to the latest data, revised from a dip of just 0.3 percent reported last month.
In April alone, total output fell 0.5 percent, driven by a decline of the same magnitude in manufacturing, as vehicle production continued to slip.
Economists had been expecting a 0.1 percent gain in industrial production for the month.
“In short, manufacturing is looking weak,” economist Jim O’Sullivan of High Frequency Economics told AFP.