- Global Times weighing in on US manufacturing sector and trade deal policies to blame.
- The article has been released ahead of this week Chinese and US Manufacturing PMIs.
Hu Weijia Source, an editor at The Global Times, has reported that the "US President Donald Trump's plan to "Make America Great Again" will come to naught due to US manufacturing woes."
Introductory paragraphs
- Reviving US manufacturing has been a key goal for the Trump administration, but a Commerce Department report released on Tuesday showed manufacturing made up just 11 percent of GDP in the second quarter, the lowest level since 1947.
- According to the US Labor Department, factories shed 2,000 jobs in September. In a Wall Street Journal economic survey conducted in recent weeks, two-thirds of economic forecasters said the manufacturing sector was in recession, which is defined as two or more consecutive quarters of contraction.
- The Trump administration has placed manufacturing at the center of its economic strategy. The plan to "Make American Great Again" is doomed to fail if the strategy focuses on bringing back jobs in manufacturing and establishing complete industry chains in the US.
Closing paragraphs
- The trade war has resulted in a reorganization of supply chains. In this process, the US' role is being weakened by its protectionism. The most urgently needed action for the US is to maintain its share of global production and consolidate the country's position in international supply chains.
- This means that manufacturers doing business in the US need both imported raw materials and external markets. With the protectionist policies adopted by the US government, more US manufacturers will suffocate to death.
US and Chinese Manufacturing PMIs to be critical this week
The article has been released ahead of this week Chinese and US Manufacturing PMIs.
- ISM Manufacturing PMI (Oct)
The Institute for Supply Management (ISM) Manufacturing Index shows business conditions in the US manufacturing sector It is a significant indicator of the overall economic condition in US. A result above 50 is seen as positive (or bullish) for the USD, whereas a result below 50 is seen as negative (or bearish). The consensus for this Friday's data release is at 48.9, slightly higher than the 47.8 prior.
However, analysts at TD Securities are somewhat more optimistic than the market consensus:
"We look for the ISM index to bounce back to 49.5 given recent optimism on trade discussions and the firming of some regional surveys."
- Caixin Manufacturing PMI (Oct)
Ahead of the US data, China releases its own where a trade war cease-fire is hoped to have helped to put a floor under PMIs. The Caixin China Manufacturing PMI™, released by Markit Economics, is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private manufacturing sector companies.
Market consensus is for 51. "Although the CNY has strengthened vs. USD it has weakened to multi-year lows on a trade-weighted basis (CFETS), a factor that will provide another source of relief to manufacturers," the analysts at TD Securities explained.
FX implications
The US Dollar, Yuan, AUD and Yen will all be in focus over these major events this week. If the markets see positive traction in these important sectors, we can expect a rally in global equities, weakness in the Yen and a firmer Dollar Yuan and AUD.
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