The Associated Press

WASHINGTON - The U.S.-China trade war and slower global growth are weighing on the U.S. economy, with manufacturing activity shrinking in August for the first time in three years.

A survey by the Institute for Supply Management, an association of purchasing managers, on Tuesday showed that factory production and new orders fell sharply last month and are now contracting. U.S. manufacturers also cut jobs, the survey found. The data has fueled concerns that the broader U.S. economy is weakening.

Other recent data has shown factory output is shrinking in Europe and much of Asia, in large part because of the U.S-China trade fight. That has weakened global demand for U.S. exports. More than half of the public comments from companies surveyed by ISM pointed to the economic uncertainty as a drag on their businesses.

The ISM's manufacturing index slid to 49.1 last month, from 51.2 in July. That's the lowest reading issued since January 2016. Any reading below 50 signals a contraction in the sector.

While consumer spending in the U.S. has remained strong, the deterioration in U.S. manufacturing could slow job growth and weaken the economy. The report suggested manufacturing will likely continue to struggle, raising concerns among some economists about a recession.

"Another couple of months of declines on this scale would leave the U.S. facing an entirely unnecessary and self-inflicted recession," Ian Shepherdson, the chief economist at Pantheon Economics, wrote in a research note.

Yet that is not a foregone conclusion. A similar downturn in manufacturing in 2016 didn't pull the broader U.S. economy into recession.


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