The U.S. manufacturing sector contracted in August, for the first time since the financial crisis.

An initial reading of the manufacturing purchasing managers’ index (PMI), dropped to 49.9 in August from 50.4 in July. The final figure will be published on 3 September, says CNBC.

A figure under 50 signals a contraction. 

As per a City AM report, a contraction in the sector will worry policymakers within the Trump administration, which has made bringing back blue-collar jobs to the U.S. a key policy.

The Federal Reserve’s interest rate-setting committee will also be concerned, with many investors hoping it will slash interest rates to ease financial conditions during the trade war between the U.S. and China.

The largest decline in new orders in a decade was the predominant reason for the weakness in the manufacturing sector in August, according to data company IHS Markit, who published the survey.

Respondents of the poll said the weak global economy had impacted exports, with the car industry registering particularly weak sales.

Tim Moore, economics associate director at IHS Markit, said: “Manufacturing companies continued to feel the impact of slowing global economic conditions, with new export sales falling at the fastest pace since August 2009.”

Moore added that together with indications of weakness in the service sector, the contraction in the manufacturing sector “collectively point to annualised GDP growth of around 1.5%”.

Factories in the U.S. slashed their inventory levels for the fourth consecutive month in August due to concerns regarding future demand, according to IHS Markit.

Moore went on to say: “The most concerning aspect of the latest data is a slowdown in new business growth to its weakest in a decade, driven by a sharp loss of momentum across the service sector,” Moore said. “Survey respondents commented on a headwind from subdued corporate spending as softer growth expectations at home and internationally encouraged tighter budget setting.”

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