President Donald Trump blamed Federal Reserve Chairman Jerome Powell and his colleagues at the central bank for hurting manufacturing companies after a key gauge of the industry’s health posted its weakest reading since the end of the last recession.
“As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected,” Trump tweeted Tuesday.
The outburst followed the release of the Institute for Supply Management’s factory index, which slipped to its lowest level since June 2009. The measure of export orders, a proxy for overseas demand, fell to 41, the lowest level since March 2009, while the imports index remained in contraction.
American manufacturing has stalled amid uncertainty caused by slowing global growth, escalating disputes between the US and its major trading partners, and a strengthening US dollar that makes exports more expensive. Economists have said the trade war was the biggest factor.
“Simmering trade tension is the obvious culprit for the manufacturing weakness,” Eric Winograd, senior US economist at AllianceBernstein, wrote in a note to clients.
Chris Rupkey, chief financial economist at MUFG Union Bank, wrote that “manufacturing executives are scared to death that the trade war is going to crush their exports to recession levels and force them to turn the factory lights out.”
Economists surveyed by Bloomberg forecast the world’s largest economy will expand by 2.3% in 2019, carried by strong consumer demand. Gross domestic product expanded 2.5% on a fourth-quarter-over-fourth-quarter basis last year.
To guard against the risk of a sharper slowdown, and to boost below-target inflation, the Fed has cut interest rates by a quarter percentage point twice this year. Policy makers haven’t signaled strongly whether they intend to lower rates again before the year is out.