Overseas Headlines-September 9, 2019

Date: September 09, 2019

United States:

A Manufacturing Recession Could Cost Trump a Second Term

“The moment usually comes during Greg Petras’s commute through the rolling hills and cornfields of southern Wisconsin. Somewhere between his home near Madison and the factory he runs on the edge of the small town of Brodhead, the news will turn to the trade wars and Donald Trump will again claim that China is  bearing the cost of his tariffs. That’s when Petras loses it. “It’s just an outright lie, and he knows it,” says Petras, president of Kuhn North America, which employs some 600 people at its farm-equipment factory in Wisconsin. For Kuhn, Trump’s trade war has produced a toxic mix of rising costs and falling revenues. “You’re slamming your fist on the steering wheel and saying ‘Why would you tell people this?’” About 250 Kuhn employees spent the Labor Day holiday caught in a two-week furlough, and they’re facing another in early October. A shrinking order book means Kuhn is cutting costs and slashing production as Petras and his managers peer out at a U.S. economy that looks far bleaker from the swing-state heartland than it does in either the White House or on Wall Street. The company’s circus-themed summer picnic survived but weekend shifts are gone. A plant that just four years ago was humming along to a record $400 million in sales together with a sister plant in Kansas is running at 50% capacity. The five-year-old, $11 million paint shop that coats the company’s manure spreaders and livestock feeders in a distinctive “Kuhn Red” is at 39% capacity. Plans for a new $4 million research and development building are on hold. “We’ll do it someday,” Petras says. “We just need things to be going in a better direction.” And there’s the rub. For all the debate on whether the U.S. is headed for a recession there’s plenty of evidence that corners of the economy—such as the one Petras and his employees inhabit—may already have tumbled into one. After two boom years the picture has changed for America’s factories. Battered by rising uncertainty and the damper it has put on capital expenditures, slowing export markets, a stronger dollar, and higher input costs due to tariffs, U.S. manufacturers are making less than they did a year ago. A widely watched index of manufacturing activity compiled by the Institute for Supply Management showed a contraction in August—the first since 2016. The Sept. 3 data release sent U.S. stock prices and bond yields tumbling as it confirmed a worrying trend that became visible over the summer, when Federal Reserve data showed  factory output falling for a second consecutive quarter.”





U.K. Economy on Course to Grow 0.3% in Third Quarter, Niesr Says

“The U.K. economy is on track to defy concerns about an imminent recession and grow 0.3% in the third quarter, according to the National Institute of Economic and Social Research. Niesr said that recent surveys indicate flat output in August, with service sector expansion being offset by contractions in manufacturing and construction. Even so, Director of Macroeconomic Modelling and Forecasting Garry Young sounded a cautious note on how long growth can continue. “Only the services sector is expanding, primarily to meet higher demand from consumers driven by increased household incomes fueled by rising real wages. But there is a limit to how much further real wages can grow without a pick-up in investment and productivity, and this seems unlikely in the near term,” he said.”





What China Has and Hasn’t Done to Address U.S. Trade Gripes

“Deep differences separate Chinese and U.S. negotiators on everything from market access to industrial subsidies as the two sides prepare to meet next month in Washington. As their trade talks unraveled in acrimony in May, the U.S. blamed China for walking back alleged commitments on issues including forced technology transfers. China responded in a White Paper, accusing the U.S. of unreasonable demands and argued that it had made “remarkable progress” in improving its business environment. So just how much has China done since the two began locking horns last year over trade and technology? China analysts say the pace of market-driven change has quickened a tad as a result of Donald Trump’s trade war.”