US manufacturing sector shrinks for first time in nearly decade

The manufacturing sector has become the problem child of the US economy.

American manufacturing activity is slowing as rising tariffs have made materials more expensive. The sector shrunk for the first time since September 2009, according to IHS Markit.

Markit’s flash manufacturing purchasing managers’ index for August fell just below 50, indicating a contraction. It was a 119-month low for the index. A number below 50 means a sector is contracting, while a number above 50 denotes growth.

The global manufacturing sector might already be in a recession, said Charles Schwab chief investment strategist Liz Ann Sonders during CNN’s digital live show Markets Now on Wednesday.

The August decline comes on the back of weak new orders, which offset slightly faster output, according to Markit. Manufacturing output rose to a two-month high of 50.6.

“August’s survey data provides a clear signal that economic growth has continued to soften in the third quarter,” said IHS Markit economic associate director Tim Moore.

The PMI data is based on a business survey, which showed that confidence regarding the year ahead dropped for the seventh month in a row and is at its lowest level since July 2012.

Manufacturing has been hurt by the trade war between the United States and China, which has weighed on global demand. That has stymied global growth and hurt export sales, Moore said.

But the “most concerning aspect” of the latest data is a slowdown in new business growth, which fell to its weakest level in a decade, Moore said. Growth has slumped because of a sharp loss in momentum across the service sector.

Services business activity also slowed in August, but they remain in growth territory. The composite flash PMI stood at 50.9, a three-month low.