While manufacturing makes up only about 11% of the U.S. economy, the risk is that further weakness will extend to service providers and prompt those companies to reduce investment and limit hiring, endangering the record-long expansion.Under the hood PMI is really ugly with employment contracting fore the first time since June 2013 and output expectations plunge to record lows; and ISM employment and prices paid plunged even if respondents claim prices are soaring because of tariffs (as new orders rebounded modestly).

Chris Williamson, Chief Business Economist at IHS Markit said:

"US manufacturing has entered into its sharpest downturn since 2009, suggesting the goods-producing sector is on course to act as a significant drag on the economy in the third quarter. The deterioration in the survey's output index is indicative of manufacturing production declining at an annualised rate in excess of 3%.