Tags: European | crisis | factory | sector

Experts: European Crisis, Global Slowdown Hits US Factory Sector

By    |   Thursday, 05 Jul 2012 07:06 AM

Europe’s financial crisis and the global economic slowdown are teaming up to put a dent in the U.S. manufacturing sector, experts say.

The Institute for Supply Management's index of manufacturing activity fell to 49.7 last month from 53.5 in May. Readings below 50 signify a contraction in the factory sector. June represented the first month with a decline in three years.

"This is probably the most definitive piece of proof that the European and global economic downturn is impacting the U.S. economy," Michael Feroli, an economist at JPMorgan Chase, tells The Wall Street Journal.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

"We're starting to feel the infection now."

The weakness overseas curbs U.S. manufacturing exports. Those shipments slipped 1.1 percent in April.

Economists estimate that the European economy shrank in the second quarter amid government spending cuts. And China’s economic growth slipped to 8.1 percent in the first quarter from 8.9 percent in the fourth quarter.

Ford Motor is one of the industrial companies suffering. It anticipates losing $570 million overseas in the second quarter.

Domestic economic weakness is hurting manufacturers too. Consol Energy, a coal producer, says it will drop 318 workers thanks to the sluggish economy.

There is a silver lining in all of this. The weak U.S. economy is pushing imports down even faster than exports, shrinking the trade deficit.

“We’re probably going to be seeing a softening in imports along with exports,” Ed Kashmarek, an economist at Wells Fargo, tells Bloomberg.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did



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2012-06-05
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