American consumers signaling serious economic trouble ahead, expert warns
American manufacturers had their worst month since the Great Recession in September, which appears to be a very bad sign for the U.S. economy when combined with other economic indicators
The Institute for Supply Management’s purchasing managers’ index fell to 47.8% in September — the lowest level since June 2009 and a contraction.
In a letter to clients on Tuesday, Deutsche Bank Securities chief economist and managing director Torsten Slok said that in addition to potential job losses in the manufacturing sector a pair of leading consumer indicators are flashing warning signs.
The first is interest in buying large household goods, including items like washers, dryers, computers and televisions.
“This sentiment indicator has historically been a very good leading indicator of the business cycle,” Slok wrote. “The bottom line is that we expect the ongoing slowdown will continue, and we see the unemployment rate moving higher on Friday.”
Another indicator that there could be more economic trouble on the horizon is the fact that consumers say they are more optimistic about today than the future.
Meanwhile, the manufacturing slowdown comes amid an ongoing trade war with China, which is believed to have weighed on Tuesday’s data.
Slok warned earlier in the day that while the ISM reading was bad — a reading of 41% for new export orders is even worse. That was the lowest reading since March 2009. He believes the risk of recession is real and serious.
Tim Fiore, president of the Institute for Supply Management, told FOX Business on Tuesday that an ongoing strike at General Motors did not artificially suppress data on the manufacturing sector last month, which some had posited as a plausible explanation for the bad reading. Currently, the report “purely” reflects a lack of demand and a lack of orders, Fiore said.
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.
FOX Business’ Jennifer Schonberger contributed to this report.