San José, CA – The U.S. stock market started October with back-to-back declines fueled by growing fears of a recession. On Tuesday, October 1, stocks fell by 1% or more following the Institute for Supply Management (ISM) reporting on their Purchasing Managers Index (PMI) for September. The index fell to 47.8, showing a contraction in the manufacturing sector – any report below 50 shows manufacturing shrinking, above 50 shows growth. The August PMI report at 49.1 also showed a drop in manufacturing, the first time in three years. The September reading showed that the decline was accelerating and was the lowest level for the PMI since the end of the last recession, more than 10 years ago.

Recession fears were also fed by a gloomy report from the World Trade Organization, which predicted that world trade growth would fall to only 1.2% in the coming year, one of the lowest rates since the last recession. The WTO estimate is made every six months and is the third drop in a row. While still expanding, world trade has been weighed down by economic weakness in Japan and Germany, the second and third largest capitalist economies after the United States.

Trade and manufacturing have also been hit by Trump’s trade war with China. His tariffs on imported parts and materials have made it more expensive to make goods in the United States, and China has also retaliated by placing tariffs on U.S. exports of goods.

On October 2, the stock market slide deepened, with losses of almost 2% as the Dow Jones Industrial Average fell almost 500 points. Recession fears mounted as another sign of economic weakness came with the ADP report on private employment in September. The ADP report saw only 145,000 new private sector jobs, much lower than the 215,000 monthly increase a year ago.

U.S. stocks followed even steeper declines in Europe, where stock indices in Germany, France, Italy and the U.K. fell about 3%. European economies have been even weaker than the U.S. economy, and there are concerns about what happens as the BREXIT deadline of October 31 approaches. The United States has also been a major export market, and a recession in the United States would hurt Europe.

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