MNI INTERVIEW: US Factory ISM To Hold In Stall Range in 2020

--ISM Survey Head Fiore Says Tariffs And Weak Demand Holding Back Activity

By Greg Quinn

     OTTAWA (MNI) - U.S. manufacturing will remain stuck between small gains and

losses next year as tariffs hold back new orders and investment, the head of the

ISM survey told MNI.

     Companies are avoiding large import orders this quarter and exporters are

struggling to make sales after China retaliated against U.S. tariffs, Timothy

Fiore said in a phone interview Monday. The prospect of a so-called Phase One

deal between the U.S. and China also may not be enough to provide a jump-start,

he said.

     "Even if the tariff issue gets resolved, people aren't going to want to

make investments, because they don't know whether the tariff issue can come

back. So people are going to wait now for the election period, and make some

decisions after that," said Fiore, chair of the ISM factory survey committee.

     The November ISM manufacturing index declined to 48.1 from 48.3, the fourth

straight reading below the 50 mark that signals contraction. The fall moves the

index back towards September's reading of 47.8, which was the lowest since the

end of the Great Recession in 2009.

     "I'm still thinking that we are going to run most of 2020 at a 48 to 52

level," for the index, Fiore said. While being a few points on either side of 50

isn't that significant statistically speaking, "it's the emotional factor that

we are contracting versus expanding," he said.

     The index's current level is still consistent with the U.S. economy growing

at a 1.5% annualized pace according to the ISM report. Still, signs of prolonged

damage from a trade war between the world's two largest economies has led

organizations like the IMF to predict the slowest global growth in a decade and

to urge political leaders to find other ways besides tariffs to settle disputes.

     The Fed has cut interest rates three times this year to support demand, and

Fiore said that "definitely" has helped the automobile and housing industries.

The November report didn't pick up much evidence that the UAW auto workers'

strike did much damage to manufacturing, he said.

     While the latest report showed ongoing contractions for underlying

questions on new orders, imports and exports, survey questions didn't show a

major rise in negative commentary about tariffs, Fiore said.

     "I think it's just the community getting used to everything," related to

trade disputes, he said. "Companies have been struggling to export to China

because of the counter tariffs."

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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