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Recession watch: Trump and markets could be set for a brutal reckoning

10 7 0

America's manufacturing industry suffered the sharpest slowdown last month since the depths of the global financial crisis, prompting calls for emergency rate cuts to avert a spiral into recession.

Fading fiscal stimulus and mounting damage from trade wars with China, Europe, and Mexico are starting to damage the US economy.Credit:AP

IHS Markit's momentum gauge fell to the lowest level since September 2009 as America's fortress economy succumbed to fading fiscal stimulus and mounting damage from trade wars with China, Europe, and Mexico.

Chris Williamson, the group's chief economist, said US profit margins are being squeezed. Manufacturers are cutting output and laying off staff. "Surging order book growth just a few months ago has now turned into contraction, the first such decline seen in the series' 10-year history," he said.

Michael Darda from MKM Partners said: "There is still time for the US Federal Reserve to right the ship, but time is running out."

Mr Darda said the yield curve for US Treasuries is inverting across every relevant maturity, flashing a red warning sign. "Long-cycle" indicators such as housing and car sales are already slipping into a deepening downturn. "It's time for the Fed to take out an insurance policy with a 75 to 100 basis point rate cut," he said. "If the Fed sits on its hands and a full blown recession gets under way, taking rates all the way back to zero may........

© The Age