On June 21, 2024, workers assembled the second-generation R1 car at the electric vehicle manufacturer Rivian’s manufacturing plant in Normal, Illinois, USA.
Joel Angel Juarez | Reuters
U.S. factories remained slowing in August, according to separate manufacturing indicators, adding to concerns about the direction of the economy.
this Institute for Supply Management A monthly survey of procurement managers showed that only 47.2% reported expansion during the month, below the 50% activity break-even point.
While that’s slightly higher than the 46.8% recorded in July, it’s below the Dow Jones consensus forecast of 47.9%.
Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee, said: “Although it is still in the contraction zone, the contraction rate of U.S. manufacturing activity has slowed down from last month. Demand continues to be weak, output has declined, and inputs have remained loose.”
“Demand remains subdued as businesses demonstrate reluctance to invest capital and inventory due to current federal monetary policy and election uncertainty,” he added.
While the index level indicates contraction in the manufacturing sector, Fiore noted that any reading above 42.5% typically indicates expansion across the economy.
Last month’s weaker-than-expected data sent the market into further disarray, ultimately sending the S&P 500 down about 8.5% before recouping most of its losses. Stocks fell further on Tuesday after the latest ISM data was released, Dow Jones Industrial Average It fell nearly 500 points.
Another piece of weak economic data raised the possibility that the Federal Reserve would cut interest rates by at least a quarter of a percentage point later this month. Traders raised the probability of a more aggressive half-percentage point cut to 39%, according to the ISM report. CME Group’s Fed Watch measure.
The survey showed that the employment index rose slightly to 46%, while the inventory index jumped to 50.3%. On the inflation front, the price index edged up to 54%, which may make the Federal Reserve hesitant in deciding to fully factor in the rate cut.
The ISM results are supported by another S&P PMI readingdropped from 49.6 in July to 47.9 in August.
The S&P employment index fell for the first time this year, while a measure of input costs climbed to a 16-month high, another sign that inflation remains, albeit well below mid-2022 highs.
“Further declines in the PMI suggest that manufacturing’s drag on the economy intensified in the middle of the third quarter. Forward-looking indicators suggest that this drag is likely to intensify in the coming months,” said chief business economist Chris Williamson.
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