MNI INTERVIEW: US Factory Sentiment May Rebound on China Deal

--ISM Index Fell to Lowest Since June 2009 in December

By Brooke Migdon

     WASHINGTON (MNI) - Manufacturing supply managers likely remain "upbeat"

about 2020 despite the December ISM index plunging to its lowest level since

2009 as China-U.S. trade tensions begin to ease, the survey's chief told MNI.

     The Phase One agreement set to be signed by U.S. President Donald Trump and

Chinese officials in Washington on Jan. 15 has marginally improved supply

managers' sentiment regarding short-term growth, though the deal's long-term

effects remain unknown, Timothy Fiore said Friday.

     "It bodes well for 2020 -- no doubt about that," he said. "Although there

are lots of rumors and there's positive sentiment, we've been through these

kinds of cycles several times now over the last two-and-a-half years."

     The December ISM manufacturing index fell to 47.2 from 48.1 in November,

marking the fifth straight reading in contractionary territory and the PMI's

lowest level since the financial crisis. The new orders index also sank to its

lowest level since April 2009 and the employment index contracted for the fifth

consecutive month to 45.1 from 46.6 in November.

     The trade accord with China announced Dec. 13 is unlikely to have been

"factored in" to the latest survey responses, according to Fiore.

     Battles between the U.S. and its trading partners have created barriers for

manufacturers, forcing some companies to consider alternate supply chains.

     Research conducted by Fed economists published Dec. 23 concluded U.S.

tariffs levied against its global trading partners since 2018 have weighed

heavily on its manufacturing sector, leading to higher input costs and

significant job losses.

     Both trade difficulties and tariffs were cited as primary reasons for more

than 17,000 job cuts in the U.S. this year, according to a report on intended

job cuts published by outplacement firm Challenger, Gray and Christmas earlier

this week. The automotive industry also saw its highest number of job cut

announcements since 2009, as did the industrial goods manufacturing industry,

according to the report.

     The 2020 presidential election and Trump's impeachment in the House of

Representatives could further dampen manufacturing investment in the near-term.

     "Even though we've reached a phase one trade deal with China, no one is

really ready to invest," Fiore said. "The election should be a positive, but

there's uncertainty about what's going to happen during the election period."

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

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