US manufacturing sunk into recession in June after two consecutive quarters of declines amid President Donald Trump’s bitter trade wars, a slowdown in China and other trading partners.
The decline comes as the United States enters its 11th year of economic recovery and occurs despite Trump’s constant pledges to restore America to manufacturing greatness — even though services now drive three quarters of the US economy.
Despite jumping in June, manufacturing fell by a 2.2 percent annual rate in the April-June period, and total industrial production lost 1.2 percent, in both cases the second consecutive quarterly decline, the Federal Reserve said Tuesday.
“Manufacturing has borne the brunt of tariff uncertainties and slowing in global economic activity,” RDQ Economics said in its analysis.
The retreat comes even as American consumers are sustaining their appetite for spending pushing retail sales higher for the fourth straight month, as shoppers in June took home more new autos and furniture and dined out more frequently.
Manufacturing jumped 0.4 percent compared to May, while total industrial production showed no change, according to the Federal Reserve report, confounding economists’ expectations for a 0.2 percent gain.
However, economists said that uptick was unlikely to be sustained in coming months.
“Manufacturing is enduring a mild recession, but it probably won’t deepen much further,” Ian Shepherdson of Pantheon Macroeconomics said in an analysis.
– Lower interest rates –
The downturn in manufacturing is “not news; it’s a consequence of China’s cyclical slowdown and the trade war,” he said.
He predicts Washington and Beijing will find a deal to end their bitter trade dispute — following the resumption of talks by telephone this month — meaning that by the end of the year “China?s economy will be turning up.”
The contrary data cast a bit of a cloud over growth figures for the second quarter and could confuse the Federal Reserve’s interest rate strategy.
Retail sales rose 0.4 percent in June, double the expected gain, meaning sales are up a solid 3.4 percent compared to June of last year, according to government data.
Despite the solid retail sector, most economists expect a modest cut in the benchmark lending rate at the end of July as an insurance move given other signs of weakness.
Shepherdson said the move is premature given his expectation for a recovery in the second half of the year.
“To cut rates now because of the recent weakness of manufacturing is a mistake, in our view, because monetary policy works with long lags, and easing in H2 will be supporting growth next year,” he said.
But Oxford Economics said “Momentum cooled precipitously in the first half of the year.”
“Looking ahead, we expect manufacturing activity and overall industrial production to remain under pressure from these headwinds.”
Oxford expects the Fed to produce “three ‘insurance’ rate cuts over the next nine months.”
Along with higher manufacturing, mining output rose 0.2 percent, while petroleum and coal jumped 2.5 percent. Mining surged 8.9 percent in the latest quarter, its 11th consecutive quarterly increase.
But with milder temperatures in June easing demand for air conditioning, utilities output fell 3.6 percent in June.
Two impeachment articles expected against President Trump: reports
Democrats are expected to announce on Tuesday two articles of impeachment against Donald Trump, US media reported Monday evening, after laying out their case at a hearing against a president they branded a "clear and present danger" to national security.
The articles will focus on abuse of power and obstruction of Congress, The Washington Post said, citing three official familiar with the matter.
It added that the full House of Representatives would vote on the articles next week, ahead of a trial in the Senate.
CNN said a third article on obstruction of justice was still being debated, and the network's sources cautioned that plans were still being finalized.
Ambassador McFaul ‘shocked’ Trump invited Sergey Lavrov back to the Oval Office: ‘What are they thinking?’
Former Ambassador to Russia Michael McFaul repeatedly said he was shocked that President Donald Trump will meet with Russian Foreign Minister Sergey Lavrov on Tuesday.
McFaul was interviewed Monday evening by Lawrence O'Donnell on MSNBC "The Last Word," where he contrasted how Trump is treating the Russian government of President Vladimir Putin to the Ukrainian government of President Volodymyr Zelensky.
"Ambassador McFaul, I want to get your reaction to the Russian foreign minister meeting tomorrow at the White House, in the Oval Office, with President Trump," O'Donnell said. "That's his second time. President Zelinsky still hasn't gotten that meeting and Donald trump apparently, apparently may be voted articles of impeachment in committee this week because of his interactions with President Zelensky."
House Judiciary to vote on Thursday to impeach Donald Trump: report
Democrats are moving ahead with the impeachment of President Donald Trump following another day of testimony on Monday.
"House Democrats plan to unveil at least two articles of impeachment Tuesday, charging President Donald Trump with abuse of power and obstruction of Congress, according to multiple lawmakers and aides. The Judiciary Committee plans to vote on the articles on Thursday, setting up a vote on the House floor next week to make Trump the third president in history to be impeached," Politico reported Monday evening.
"Democratic leaders plan to formally announce the articles at a press conference Tuesday morning. Judiciary Committee Democrats intend to meet ahead of the announcement and review the articles," Politico reported. "The decision to move forward with specific impeachment charges is the most significant move yet for the year-old Democratic House majority, a legacy-defining moment for Speaker Nancy Pelosi that sets up a Senate trial for Trump in early 2020."