US manufacturing shows weakness despite uptick in August
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The news: US manufacturing activity in August rose slightly from an eight-month low but fell short of expectations, remaining in contraction for a fifth consecutive month.
The numbers: The Institute for Supply Management (ISM) reported a PMI increase to 47.2, up from July’s 46.8, as the overall trend continued to show weakness.
A reading below 50 indicates a contraction.
New orders and production continued to decline, while input costs rose. Employment showed a slower pace of contraction, however, with manufacturing employment coming in at 46, up from 43.4 in July.
Underlying data suggest the manufacturing sector is struggling with higher borrowing costs, declining backlogs and shrinking export orders.
US stocks tumbled as the data revived fears of an economic slowdown, pushing the S&P 500 and Nasdaq to their worst day since early August.
Chip stocks led the Nasdaq's decline, while Treasury yields dipped and oil prices slumped amid concerns over Chinese demand for commodities, hitting mining and energy stocks.
The context: The Federal Reserve is expected to start cutting interest rates later this month, which may provide some relief. Although substantial changes are not expected until late 2024 or early 2025.
What they said: “There’s no doubt that the interest rate reductions that will probably come in September are going to help,” Timothy Fiore, chair of the ISM’s Manufacturing Business Survey Committee, told reporters in call.
“But I’m not so sure they’re going to help in the short term. We’re not going to see things really start to change here until December, January.”
The sources: ISM statement , Bloomberg
