Closing post
Time to wrap up…
US factory activity has contracted for a third consecutive month, as American firms warn that tariffs are disrupting their businesses.
The latest PMI survey from the ISM has found that new orders and backlogs contracted in May, as production and employment contracted.
China has accused the US of “seriously violating” the fragile US-China detente that has been in place for less than a month since the two countries agreed to pause the trade war that risked upending the global economy.
China’s commerce ministry said on Monday:
“The US has successively introduced a number of discriminatory restrictive measures against China, including issuing export control guidelines for AI chips, stopping the sale of chip design software to China, and announcing the revocation of Chinese student visas.”
Trade war worries have knocked the US dollar today, sending the pound towards a three-year high.
Stocks have fallen on Wall Street, after a sell-off in parts of Asia.
But in London, shares in defence companies have rallied as the UK government lays out plans for new investment.
In the UK property sector, mortgage approvals fell to the lowest in over a year in April.
But prices recovered in May, according to lender Nationwide.
The surprise decline in the ISM manufacturing index in May (see earlier post) indicates that tariffs continue to weigh significantly on the sector, says Alexandra Brown, North America economist at Capital Economics.
Brown explains:
While the May data is less gloomy than initially appears, as a sharp decline in inventories offset a strengthening in the other components of the index, its low level points to manufacturing output stagnating at best.
The headline index edged lower to 48.5 last month, from 48.7. This was driven by inventories, which fell 4.1 points, as firms drew down on their large inventories previously stockpiled to avoid tariffs. The production and new orders indices both rose, although a decline in the new export orders indicates that the latter was driven by domestic demand.
