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Updated: October 1, 2019

America's factories just suffered their worst month in a decade

By Anneken Tappe | CNN Business

In the surest sign yet that the trade war is hurting the American economy, manufacturing activity contracted in September to a 10-year low.

The Institute of Supply Management's closely watched index showed a decline in manufacturing for the second month in a row. September's reading of 47.8 was its lowest since June 2009, and it was worse than what economists had expected. A reading above 50 denotes growth in the sector.

"Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019," said Timothy Fiore, chair of the ISM's manufacturing business survey committee.

Making matters worse, the contraction in September was steeper than in August.

In August, the sector contracted for the first time in three years because of higher prices that factories pay for materials and weaker global demand. And the slowdown clearly isn't over.

The overall index number was bad, but even more worrisome is the report's drop in factory orders of exports, said Torsten Slok, chief economist at Deutsche Bank. "There is no end in sight to this slowdown, the recession risk is real," he wrote in a note to clients.

While companies that make machinery cited softening demand and reduced backlogs, food, beverage and tobacco producers said Chinese tariffs are hurting their businesses, the ISM survey showed.

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