Has Trump manufactured a re-election challenge?

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Has Trump manufactured a re-election challenge?

Since slipping into contraction in August, the US Institute for Supply Management (ISM) Manufacturing index has fallen further below the key 50 percent threshold now at a multiyear low at 47.2 percent. Meanwhile, the ISM non-manufacturing index is showing a different story. Although it has also been on the decline since around September, the series has yet to come close to 50 percent and printed a better than expected reading for December, now at 55 percent. The most recent readings have brought the difference between the two series to levels only seen a few times since 2000.

As investors turn more optimistic on the US growth outlook in the new year, it’s worth noting that the manufacturing recession— partially due to the cost of tariffs on US importers, as explored in a recent paper from Harvard University, the University of Chicago and the Boston Fed—has thus far not impacted non-manufacturing sentiment. This decline in manufacturing could be a rough re-election point for President Donald Trump who won the rust-belt states in the 2016 election with a promise to revive manufacturing. Instead, manufacturing stands out as significantly weaker than its non-manufacturing counterparts.

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