WASHINGTON: American consumers appear to be carrying the US economy in their shopping carts as manufacturing slumps amid President Donald Trump’s trade conflict with China, and financial signals warn of a possible recession.
“The economy is phenomenal,” Trump said on Thursday. “We had a couple of bad days but we are going to have some very good days because we had to take on China.”
But despite his cheer leading, a raft of new US data reports showed a mixed picture on the economy, leading Wall Street to post a modest recovery from its worst day of the year.
Global financial markets remain concerned about slowing European and Chinese economies, which caused a closely watched recession signal to flash red, sending stocks worldwide down two per cent or more on Wednesday.
Longer term bond yields continued to fall with the 30-year US Treasury bond dropping below two per cent for the first time ever, while the 10-year hit the lowest point in three years as investors sought safe havens to hedge against a possible downturn.
Trump continued to call on the Federal Reserve to cut interest rates, saying it made a “big mistake” by increasing too fast. Fed Chairman Jerome Powell “should be cutting rates. Every country all over the world is cutting. We want to stay sort of even,” Trump told reporters.
The US manufacturing sector, which declined in the first two quarters of the year, putting it in recession, slumped again in July and is now down 1.5 per cent this year, the Federal Reserve reported.
That comes on the heels of other data showing the trade war has undermined business confidence and is curtailing investment amid the uncertainty.
“It is hard to avoid the conclusion that the industrial sector is being dragged down by overseas developments,” analysts John Ryding and Conrad DeQuadros of RDQ Economics said.
Their analysis highlighted “the impact of tariffs on supply chains, and the effects of uncertainty about these policies may have had in subduing capital spending.”
Although Trump has made boosting manufacturing a central focus of his economic policies, this sector makes up a dwindling share of the US economy.
Even before Trump gave retailers an early Christmas bonus by delaying tariffs on more than half the $300 billion in Chinese goods targeted for new 10 per cent punitive duties, Americans’ spending habits were buoying the economy.
That trend continued in July, the first month of the third quarter, as retail sales jumped 0.7 per cent, far more than expected, driven by e-commerce and Amazon’s 48-hour prime “day,” according to new data from the Commerce Department.
“The United States is now, by far, the Biggest, Strongest and Most Powerful Economy in the World, it is not even close!” Trump tweeted. “As others falter, we will only get stronger. Consumers are in the best shape ever, plenty of cash.”
Walmart — which has been beefing up its online presence to compete with Amazon — added to the good retail news, reporting better than expected profits in the latest quarter and boosting its forecast for the year.
— AFP
Oman Observer is now on the WhatsApp channel. Click here
