MNI INTERVIEW: ISM's Fiore: Orders Tank On China Tariffs

By Brooke Migdon

     WASHINGTON (MNI) - Tariffs on Chinese exports remain a significant issue

for U.S. manufacturers as activity contracted for the first time in three years

and the issue is unlikely to be resolved soon, Institute for Supply Management

economist Tim Fiore told MNI.

     The ISM Manufacturing PMI contracted 2.1 points to 49.1 in August, ending

35 months of expansion and signaling trouble for future output and employment.

Readings below 50 signal declining activity.

     The new orders index fell 3.6 points to 47.2 in August. Only three

industries reported gains in new orders. Likewise, the production index fell 1.3

points to 49.5 with only half of the surveyed manufacturing industries reporting

growth. The employment index also contracted, sinking 4.3 points to 47.4.

     "Things don't appear anywhere near resolved," Fiore, chair of the ISM

Manufacturing Business Survey, said Tuesday. "The tariff situation is going to

be here for the long haul."

     New export orders fell to a record low 43.3 reflecting a heightened concern

among survey respondents about U.S.-China trade turbulence. Approximately

one-third of comments regarding overall sentiment referenced tariff and

trade-related apprehensions, according to Fiore.

     In an attempt to mitigate their exposure to trade escalations and impending

tariffs, many manufacturers are seeking to move manufacturing operations out of

China as quickly as possible, Fiore told MNI.

     However, industry managers are still scrambling to figure out alternatives.

"I don't think the manufacturing sector has it under control at all," he said.

     The recently-weakened yuan is no longer strong enough to offset the effects

of tariffs on more than $100 billion of consumer goods from China, he said,

predicting that operations will most likely relocate to places like Mexico.

     Half of the manufacturing industries surveyed reported a decrease in

employment in August.

     Fiore said demand, which fell this month, heavily influences hiring

activity and manufacturers are worried that staffing levels may already be too

high.

     "About 25% of comments in the employment sector were related to maintaining

current staffing levels," he said, suggesting potential declines in

manufacturing employment moving forward.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

[TOPICS: MAUDS$,M$U$$$,MI$$$$,MX$$$$]