US factory activity shrinks for first time since 2009
Activity in America’s factory sector has contracted for the first time in almost a decade, a survey of executives showed, adding to concerns that slowing global growth and the US-China trade war are weighing on the industrial economy.
IHS Markit’s US manufacturing purchasing managers’ index dropped to 49.9 in August, falling below the neutral level of 50 for the first time since September 2009. The reading missed economists’ expectations of 50.5, according to a Reuters poll.
Growth in new orders cooled to the weakest level in a decade, while new export sales dropped at the swiftest pace since the summer of 2009, the report showed.
Markit’s PMI covering the vast US services sector slid to 50.9, from 53 previously, suggesting activity there has nearly stalled.
“August’s survey data provides a clear signal that economic growth has continued to soften in the third quarter,” said Tim Moore, economics associate director at IHS Markit. “The PMIs for manufacturing and services remain much weaker than at the beginning of 2019 and collectively point to annualised GDP growth of around 1.5 per cent.”
A separate survey from the Institute for Supply Management, due to be published in coming weeks, tends to be more closely watched. But the gloomy data released on Thursday highlight sharpening concerns about the world’s biggest economy.
The data come ahead of Federal Reserve chair Jay Powell’s speech at the annual gathering of monetary policymakers in Jackson Hole, Wyoming. The central bank already cut interest rates in July for the first time since the financial crisis, but at the time, Mr Powell remarked that it was a “mid-cycle adjustment to policy” rather than the start of a more aggressive cycle of monetary easing.
Markets have, however, priced in additional rate cuts this year and investors will be waiting to see if he does signal further rate cuts when he delivers his remarks on Friday.