With weak demand and a stronger U.S. dollar, the North American manufacturing sector is at increasing risk of an industrial recession, Moody’s Investors Service warned on Tuesday.
Soft demand from key markets and prolonged weakness in U.S. industrial output point to increasing risks of an industrial recession in the North American manufacturing sector, says a new report from the New York based credit rating agency. The Moody’s report indicates that slowing growth in China, the strong U.S. dollar, and weakness in commodities, have dampened global demand for North American industrial products.
“As oil & gas, metals & mining, and agricultural companies continue to soften in response to commodities volatility and slowing demand from China, the adverse effects will flow through to North American manufacturers with exposure to these sectors,” Moody’s says in a statement, noting that manufacturing companies are already lowering their fiscal 2016 earnings forecasts.
The rating agency indicates that these trends could perpetuate the weakness in manufacturing. “Slowing demand leads companies to delay investment and cut costs to protect their profits,” said Chris Wimmer, vice president and senior credit officer at Moody’s. “But these measures create a cycle that further weakens demand, leading to recessionary conditions that could keep the industry from rebounding as quickly as it did in the wake of the Great Recession.”
See also: Outlook 2016