New York manufacturing activity posted its worst contraction since the financial crisis of 2008 last month, signaling to experts that the United States may already be in a recession.
According to the Federal Reserve Bank of New York, the Empire State Manufacturing Index declined to a negative 14.9 from positive 3.9 in July—a reading not seen since July of 2009. Mind you, the negative number represents a contraction in the state’s economy. (Source: The Federal Reserve Bank of New York, August 17, 2015.)
U.S. manufacturing has been suffering from the rising U.S. dollar over the past few months as well as a series of economic downturns overseas. The rising dollar caused American goods to become more expensive for foreigners with other currencies.
Weakening demand for U.S. goods left factories with a lot of excess supply, which forced many of them to cut back their production.
The ongoing crises in the eurozone have sent the euro to its lowest level since 2004. There’s a problem; eurozone countries are the biggest importer of American goods.
The Canadian economy is believed to be entering into a recessionary zone. This sadly forced the Bank of Canada to lower the country’s interest rate for the second time in the past few months. Consequently, the Canadian dollar plunged to its lowest level since the financial crisis in 2008. The declining Canadian dollar, against its counterpart, forced Canadians to cut back their imports from the U.S.
China, the world’s second largest economy, is slowing down much faster than many economists had anticipated. Last week, authorities in China were forced to devaluate the yuan in order to help the troubled economy grow. Ultimately, a weaker yuan and a stronger greenback would negatively impact U.S. manufacturers.
To put all of these facts into perspective, the U.S. economy is doing relatively better compared to other countries. However, the question is whether the U.S. economy is strong enough to be immune to the upcoming slump in the global economy. Only time will tell.