These 7 charts show the effect of Trump's trade war on the US economy - and why a big slowdown is looming

Trump carrier factory brightenedPresident Donald Trump at a Carrier factory in IndianaMike Segar/Reuters

  • The American economy looks to be at a turning point, as data from a variety of sources seems to point towards a slowdown in the economy.
  • ISM manufacturing data released this month made for gloomy reading about America's industry, while job growth continues to decline.
  • These charts sum up the health of the US economy.
  • View Markets Insider's homepage for more stories.

The American economy looks like it's at a crucial turning point, and while most data suggest that recession isn't likely in the near future, growth is almost destined to slow.

Pantheon Macroeconomics's series of charts show how the economy is faring:

Manufacturing data shows that industry is struggling as the trade war dampens demand for American products.

Job growth also looks like it's slowing - nonfarm payrolls came in well below expectations earlier this month.

But retail sales and consumer spending seems to be shrugging off the effect of the trade war, and is helping to stave off any potential recession.

Pantheon economists said in the note that currently they have "abandoned" the idea of a trade deal between China and the US this year, adding:

"Both sides are hurting, both politically and economically, but we are becoming increasingly worried that the Chinese leadership is giving up on Mr. Trump, frustrated by his capriciousness, and is prepared to wait until after the 2020 election before committing to a deal."

Below are some charts that show how the economy is doing and what could happen in the future:

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GDP growth is slowing, but it doesn't look like recession is likely.

GDP growth is slowing, but it doesn't look like recession is likely.

"Economic growth averaged a solid 2.5% in the first half of this year, better than the 2.0% average in the second half of last year." But the economics research firm said that this comes with a warning, that tariffs could depress real incomes and exports could "plunge."

Manufacturing is struggling.

Manufacturing is struggling.

At the start of this month, data showed that factory activity dropped unexpectedly. ISM data showed that the purchasing managers index in August fell to 49.1. The contraction came as a result of the drop in demand due to the trade war, but it was still a shock that ISM data showed that manufacturing activity dropped to below 50 as it's a signal of a slowdown.

Smaller businesses aren't investing in the future because of uncertainty.

Smaller businesses aren't investing in the future because of uncertainty.

To add to this data from smaller businesses showed that Main Street is investing less in the future, with data from the National Federation of Independent Business showing that business optimism among smaller businesses fell to 103.1 — a 1.6 point fall. With more uncertainty about the future, America's smaller businesses are feeling the heat of Trump's battle with China.

Exports are falling rapidly.

Exports are falling rapidly.

China is one of the major trading partners of the US — meaning that exports have suffered massively because of the trade war. As a result, smaller businesses and industrial production have both suffered a knock-on effect.

Pantheon said: "The intensification of the trade war is now hammering both exports and business confidence." And: "Exports appear set to plunge."

The yield curve is inverted.

The yield curve is inverted.

Possibly the most talked-about indicator of recession in recent months, the yield curve, inverted in July — signalling that we could have a recession within the next year. But with GDP trending upwards, Pantheon says it doesn't look ominous just yet.

Retail is bucking the trend.

Retail is bucking the trend.

Despite pressure, retail sales have remained strong and forecasts show this is set to continue. However, through other indicators, Pantheon says this might not last.

"Consumption will slow as the tariffs depress real income growth," said the research firm, adding wage growth remains subdued.

Jobs are taking a hit.

Jobs are taking a hit.

Nonfarm payrolls came in way below expectations this month, as 130,000 jobs were added to the US economy in August, compared to the 160,00 expected. Pantheon at the time warned that this is just the start and that by late fall growth could slump.

"Employer surveys and other data suggest that job growth is on course to slow to just 50,000 or so by late fall," said Pantheon Macroeconomics. "This implies that unemployment is likely to start creeping higher, and we expect layoffs to start creeping up too."

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