US Manufacturing Sector
A worker assembles an industrial valve at Emerson Electric Co.’s factory in Marshalltown Iowa (Photo: Reuters / Timothy Aeppel)

Manufacturing activity in the United States dropped to a 10-year low in September as the country continues to deal with decreasing sentiments brought about by its on-going trade dispute with China. Apart from weighing on exports, the trade dispute has also increased fears in the financial market of continued economic growth slowdown for the rest of the year.

Institute for Supply Management (ISM) data released on Tuesday showed a clear drop in manufacturing activity in September from the already low figures reported for the month of August. The country's manufacturing sector accounts for around 11 percent of the United States' economy.

The ISM data revealed that the index for national factory activity in August had dropped by 1.3 points to 47.8. The reading is the lowest ever since June 2009 just after the Great Recession. A reading of above 50 points indicates expansion, while a reading below 50 indicates a contraction.

The reading for the month of September marked the second straight month of contraction and the sixth straight month of continued decline. Analysts have stated that the continued drop in the ISM data poses a significant risk to the country's economic expansion.

If the ISM index drops to below 42.9, it would signal a clear economic recession. Economists at Deutsche Bank Securities have warned that there is currently no clear sign that the slowdown will stop in the coming months, essentially posing a real threat of a possible recession.  

The accompanying survey also outright blamed the low figures on the Trump administration's already 15-month long trade dispute with China. The geopolitical situation has drastically undermined the country's manufacturing industry and has decreased overall business confidence.

Despite the government's claim of protecting the country's manufacturing sector as the purpose of the trade negotiations with China, the opposite now rings true. The country manufacturing sector has become the industry that has been the most affected by the ongoing dispute as a result of China's retaliatory tariffs against the United States.

US President Donald Trump blamed the Federal Reserve for the low figures after the ISM survey was released. The president mentioned in a tweet that the Federal Reserve's Chair Jerome Powell has allowed the US Dollar to get too strong, negatively affecting manufacturers.

 The Fed had cut interest rates in September, just a few months after it lowered borrowing costs in July. The move was the first time the Fed had lowered borrowing costs since 2008. Some analysts have predicted that the continued manufacturing activity decline could further push the agency to lower interest rates again, potentially within this month.