Donald Trump has renewed his attack on the US central bank after a reading of domestic factory activity came in at its worst level for a decade.
As US economists blamed friendly fire – the effects of the president’s trade war against China – Mr Trump used his Twitter account to again accuse the Federal Reserve of damaging the economy through a strong dollar.
He demanded further cuts in interest rates to help weaken the US currency, making the country’s goods more attractive to foreign buyers in the process.
As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!
— Donald J. Trump (@realDonaldTrump) October 1, 2019
Mr Trump tweeted: “As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected.
“Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!”.
The Fed has, twice this year, cut interest rates as US economic growth has weakened in line with global trends.
The president launched his trade war with China in the summer of 2018 as he sought to reduce the country’s trade deficit with its biggest economic rival through a protectionist agenda aimed at supporting US jobs.
There have been several tit-for-tat escalations in the number of goods covered by additional import tariffs since and there is currently no sign of a ceasefire ahead, despite pressure from many US industry groups.
They have argued the policy is counter-productive because higher costs mean less business.
Economists have blamed the effects of the trade war for dampening demand in the global economy – with major export nations, such as Germany, caught in the cross-fire.
The US factory data made for grim reading.
The figures from the Institute for Supply Management, an association of purchasing managers, suggested output was at its weakest since June 2009 and contracting, at a faster pace, for a second consecutive month in September.
Production and employment measures were also lower.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, suggested that the trade conflict was inflicting more damage on US factories than China’s.
He said: “The trade war is wreaking havoc, to the point where the incipient upturn in manufacturing in China is not transmitting, at all, to the US.”
Other experts said the figures may have been skewed by a strike at General Motors.
In a further blow to the president, the dollar was trading at its highest level since May 2017 against a basket of international currencies on Tuesday afternoon after the manufacturing figures were released.
Weak economic data tends to hurt a currency but market watchers cited continued concerns about a short-term funding squeeze in the US money markets – driven by fears, in some quarters, that a recession is looming.
Stock markets were down in Europe while the S&P 500 in New York was 1% lower in afternoon deals.