American Economic Indicators Flash Red

June 28, 2016United Statesby EW News Desk Team

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A number of economic indicators released recently point to a weakening American economy.  Americans are buying fewer services, manufacturing activity is down, and America’s trade deficit—along with the rest of the world—is growing.

In June, services demand fell, according to a new study by Markit Economics. The Markit flash services Purchasing Managers Index (PMI) saw a slight increase to 51.3, which Markit calls a “subdued” increase from the prior month’s 51.2 reading.

"June data highlighted another subdued month for the U.S. service sector, with activity growth remaining marginal and job creation easing to its least marked for a year-and-a-half,” the research firm said in its study, adding that service providers suffered “another drop in confidence regarding the year-ahead business outlook."

Markit also said this bodes ill for GDP growth for the second quarter of 2016, after the Atlanta Federal Reserve downgraded its growth expectations as the quarter ends. “The average reading for the second quarter of 2016 (51.8) was only slightly stronger than seen during the first three months of the year (51.4),” Markit said.

Meanwhile, the Dallas Federal Reserve saw manufacturing activity fall again, with production down seven points, capacity utilization down 9.3 points, and new orders down 14.2 points. Some analysts had hoped for a rebound in Texas activity because of buoyant oil prices, but that is not yet translating into gains for the oil-dependent state’s economy, as broader macroeconomic headwinds crimp the state’s markets.

Markit Economics Chief Economist Chris Williamson noted that weakness in manufacturing in America has made the country more dependent on services, so the continued softness in PMI data is an indicator that the overall country’s economic health is waning.

“Growth continues to be reliant on the service sector, with manufacturing acting as a drag on the economy. However, even the service sector has seen growth weaken in recent months, with firms citing increased uncertainty over the economic and political outlook both at home and abroad,” he said.

In part because of a decline in manufacturing, America is exporting less to the rest of the world. This has caused the country’s trade balance to go further into the negative, down from $57.5 billion in April to $60.6 billion in May, a wider decline than economists had predicted.

The Census Bureau study noted exports fell from $119.2 billion to $119.0 billion from April to May, while imports rose markedly from $176.8 billion to $179.6 billion. The growth was largely a result of imported industrial supplies, which rose almost $2 billion, while capital goods imports suffered a slight decline. Food imports were relatively flat, while auto imports, consumer goods, and other goods all rose modestly.