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American manufacturing is feeling the heat of China's slowdown.
- Data released on Monday showed that Chinese industrial production fell in August - that's after hitting a 17-year low in July, just showing how much the trade war is hurting China's
economy . - Pantheon Macroeconomics said that this slowdown in China is "dragging" American manufacturing down with it.
- Pantheon also said that the state of industry plays a major part in "manufacturing-heavy swing states in presidential elections."
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Data released on Monday showed that the trade war is continuing to hurt the world's second-biggest economy, as industrial production fell in August.
For Americans, the worry is that this fall will drag US manufacturing with it - something that could play a major part in next year's election.
According to Capital Economics, growth in Chinese industrial production continued to fall, hitting 4.4% year on year last month. This comes after hitting a 17-year low in July at 4.8%, a figure that missed estimates considerably (Bloomberg reported that estimates were at about 5.2%.)
For economists, the worry is that this fall in Chinese manufacturing will have a knock-on effect on the US.
"Manufacturing is in recession," said Ian Shepherdson, chief economist at Pantheon Macroeconomics in a note, who added that it doesn't look like there are any signs of recovery for the US just yet.
"The sector initially was dragged down by China's cyclical slowdown, but the intensifying trade war is now the dominant factor, dragging down the ISM manufacturing survey even as its Chinese equivalents have stabilized."
Shepherdson said that usually Chinese manufacturing figures lead ISM by "two or three months," but he warned that currently there are clear red flags as ISM manufacturing hit a 3-month low in August.
"If the trade war continues for some time, as we expect, then the modest improvement we anticipate in the Chinese manufacturing sector by the early part of next year will not deliver the usual bounce to the US," said the economist.
"For now, we expect US manufacturing output to trend slowly downwards, extending the decline which began in the first quarter," he added.
Shepherdson also warned that this decline could play a major part when it comes to next year's election cycle.
He said: "The weakness of the industrial economy matters disproportionately to markets, the media, and politicians, given the importance of manufacturing-heavy swing states in presidential elections."
Last week, the trade war looked like it was starting to thaw as China announced that it would restart its buying of American agricultural goods such as pork and soybeans, while Trump announced he would delay the next round of tariff hikes to mid-October.
Liao Min, China's deputy finance minister will be travelling to the US on Wednesday ahead of talks according to China's Xinhua News Agency. The state-owned agency said that the visit will "pave the way" for talks in October.
Pantheon Macroeconomics
American manufacturing is trending downwards.
See More: Trump's trade war is triggering a 'sharp slowdown' among American small businesses.
