What's going on?

It was soaring like an eagle, but US manufacturing activity dipped in June � mirroring Europe of late. American factories are continuing to hire and raise prices though, so what gives?

What does this mean?

Data from a survey released on Friday showed growth in US manufacturing activity was at its lowest since November 2017. Furthermore, according to a survey released on Thursday, manufacturing activity in parts of the Northeast of America was below investor expectations.


In the euro area, while manufacturing activity didn�t shake off this year�s malaise in June, the services sector (i.e. jobs that don�t involving making things) was going gangbusters � creating jobs at a rate not seen in a decade. The region�s economic growth is likely to be 0.5% in the second quarter of 2018 � just as the central bank predicted.

Why should I care?

For markets: Manufacturing makes up an important part of the US economy.

Manufacturing contributes about 10% to the US economy each year � behind only public administration, and services (tweet this). If the recent slowdown persists, it could have a pretty big impact on the country�s economic growth � which is currently expected to come in 2.8% higher than last year. Manufacturing companies are still expecting to spend more on things like machinery (a.k.a. capex), however � a sign that they think activity�s going to pick up again pretty soon.

The bigger picture: Even German efficiency could be derailed by tariffs.

An economic survey asking German business owners about their future expectations revealed they�re actually pretty nervous � especially those in the retail and manufacturing sectors. One possible reason is the import taxes (a.k.a. tariffs) that have been introduced and which may send the prices of products higher. Business owners are likely to face higher costs to produce things, which will dent profits unless customers are also charged higher prices � and this may result in fewer sales overall. Quite the catch-22.