Trade War Shock, US Manufacturing Industry, Economic Deterioration, Economic Shadow

The trade between the United States and China has lengthened, and Global trade flows have slowed down significantly. The US manufacturing index dropped to a 10 year low in October 1st (2019). The manufacturing boom contracted for two months, leading to a collapse in US stocks and investors' doubts about the economic outlook.

ISM announced that the manufacturing purchasing managers' index (PMI) dropped to 47.8 in September, down from 49.1 in August, the lowest since June 2009. The index is divided by 50 as a boom and bust. In August, it fell below 50 for the first time in 3 years, and the manufacturing boom continued to shrink and the situation worsened, which sounded the alarm for the US economy.

The US stock market opened in October 1st, and the above data came out of red. The Dow Jones Industrial Average fell 343.79 points, or 1.28%, to 26573.04. The standard & Poor's 500 index fell 36.49 points, or 1.23%, to 2940.25. The two indexes all reflect on the third quarter increase, but they have risen more than 14% since the beginning of the year.

US stocks have suffered the worst since August 23rd, and the market is "green". The Dow Jones index was divided into 30 tier stocks, 26 files black; the S & P 500 index 11 major stocks fell, industrial, material, energy and financial stocks fell more than 2%.

In addition to the sluggish manufacturing industry in the United States, the European and Asian PMI released also show that the manufacturing boom is cooling down, highlighting the impact of tariff increases on the impact of exports on manufacturing.

The latest forecast of the World Trade Organization (WTO) shows that global cross-border logistics will grow by only 1.2% this year, down from 3% in 2018. If this prediction is true, Global trade flows will write the lowest annual growth rate since 2009. WTO Secretary General Roberto Azevedo warned that trade flows are slowing down, threatening investment and employment.

Trump, the US president, blamed the deterioration of manufacturing data on the Federal Reserve Board (Fed). He repeatedly advocated that the Union would actively cut interest rates and declared that the interest rate policy must be responsible for the recent rise of the US dollar to two years high.

Trump wrote in twitter in the morning that Bauer and Jerome Powell made the US dollar too strong, especially with respect to "all other currencies", resulting in a negative impact on the US manufacturing industry.

Trump has been reelected and has continued to maintain economic stability and declared that he can win the US China trade war. But the recent figures show two things in the US economy. Private employment and consumption continue to boom. Manufacturing is like a car that runs out of oil, slowing down.

According to the Wall Street journal, the proportion of manufacturing industry in the United States is much less than that in the past. It accounts for only 8.5% of the total employment and 11% of gross domestic product (GDP). However, the effect of factory products in transportation, warehousing and retail links can not be ignored.

For example, in the fourth quarter of 2008, the US economy was ravaged by the financial crisis, and the GDP fell by an annualized rate of 8.4%, which accounted for 7.5 percentage points. There are similar cases in the first two economic recession in the United States.

The article points out that the latest manufacturing data does not mean that the US economy is on the verge of recession. After all, PMI is based on the survey of purchasing managers, and is easily affected by emotional fluctuations. But in September, the manufacturing index was further explored at a time when the US China trade war was slowing down, the stock market rebounded, and the market forecast boom was coming back.