Trump faces serious setback as US manufacturing drops to near 3-year low as exports shrink
President Donald Trump (MSNBC)

America's manufacturing slowdown worsened last month as weaker demand sent activity to its lowest level in nearly three years, according to a survey released Thursday.

It was the fourth straight monthly decline in manufacturing and brought the sector perilously close to contraction, according to the Institute for Supply Management.

It was a setback for President Donald Trump who has focused his attention on boosting manufacturing, and launched aggressive trade conflicts with China and US trading partners in a bid to shore up American industry.

But ISM's nationwide manufacturing index fell to 51.2 percent in July, the lowest since August 2016, down a half point from June. Economists had expected a small increase.

Any reading above 50 indicates growth but the index is now well below a 12-month peak of 60.8 recorded in August of last year.

Now in the red for three months, new orders plunged deeper into contraction, showing steadily weakening demand. Export orders, a sign of foreign demand, also fell into contraction.

Factory output is in decline around the world as the global economy slows, with Trump's trade wars also weighing on the sector by raising prices and creating uncertainty, analysts say.

Timothy Fiore, chair of ISM's manufacturing survey, told reporters the uninterrupted slump in US manufacturing was worrisome.

"In all previous declines we've had ups and downs and we've had four straight months here of declines," he said.

But, he added, "I'm not sure that I'm ready to say that we're ready to contract."

Nine of 18 manufacturing sectors contracted, including metal goods manufacturers and steel mills, electrical equipment, machinery and transportation -- an industry badly hit by Boeing's 737 MAX crisis.

Boeing has slowed production of its 737 MAX jets, which have been grounded worldwide since March in the wake of two deadly crashes.

One survey respondent said, "We are a third-tier supplier to [a major aircraft manufacturer], and it appears its production slowdown of [an aircraft] is having a direct effect on our slowing orders."

Employment growth in manufacturing persisted but was significantly slower than in June, according to the survey.

Federal Reserve data indicate the US manufacturing sector was in recession for the first half of 2019.

Fiore said manufacturers got some relief after President Donald Trump called off a threat to impose tariffs on imports from Mexico.

But producers now appeared resigned to living with the tariffs Trump has placed on roughly $250 billion in Chinese imports since last year.

"I think the community is kind of accepting the fact that those tariffs are going to remain for quite some time," he said.