The Australian dollar fetched $0.6712, having hit a 10 1/2-year low of $0.6672 the previous day after the Reserve Bank of Australia cut interest rates and expressed concern about job growth. They are their own worst enemies, they don't have a clue. A reading of above 50 points indicates expansion, while a reading below 50 indicates a contraction.
A closely watched measure of USA manufacturing hit its lowest level in August since the Great Recession, reflecting a plunge in exports due to trade tensions. A Fed measure of production already signaled USA manufacturing is in a recession when it contracted in the first half of this year.
On Tuesday, more sobering signals surfaced as data on manufacturing from around the globe underscored how decelerating exports and rising business uncertainty in the wake of deepening trade and political turmoil are presenting ever stronger headwinds for major economies. Some of the macro news that we have been getting lately points to a real slowdown that may turn into a recession.
"The main reasons appear to be slower growth overseas and trade policy developments - two sources of uncertainty that we have been monitoring all year", Fed Chairman Jerome Powell told reporters at a press conference last month. Consumer spending, which powers most of the US economy, did not pull back much then and remains healthy so far. Furthermore, global trade remains a significant issue for many manufacturers and sentiment overall remains cautious regarding growth prospects in the short term. That move prompted a tumble in Australian Government Bond yields, and the AUD, with local currency trading at a fresh 10 year low briefly overnight.
Meanwhile, business investment in the second quarter declined at the fastest rate since the final quarter of 2015, and GDP in the second quarter grew at a rate of 2% - below the 2.6% seen throughout the first half of 2019.
The bad news hit Wall Street immediately, exacerbating recession fears, but stocks soon staged a partial recovery.
The new export orders index was only 41%, the lowest level since March 2009, down from the August reading of 43.3%, ISM data showed. While not quite as low as June's ten year low, it does mark the fifth straight month that the measure has been below the level of 50 that denotes contraction. The employment gauge also suffered a second month of contraction. September saw the steepest drop in employment since Dec 2009. These three industries show the fewest gans by industry since 2013.
"The ISM index is just another indication that the global manufacturing slump has officially arrived stateside and a couple more points off the headline index would signal that the United States economy is at the precipice of an economy-wide contraction in output", Fotios Raptis, senior worldwide economist at TD Economics, said in a note. Machinery manufacturers said demand was 'softening on some product lines, backlogs have reduced, and dealer inventories are growing.' Electrical equipment, appliances and components makers noted that the 'economy seems to be softening, ' adding that 'tariffs have caused much confusion in the industry'.