US manufacturing grows at weakest pace in nearly three years
The US manufacturing sector grew at its weakest pace in nearly three years in July, as the strains from America’s trade war with China continued to take its toll on business confidence and investment.
The Institute for Supply Management said the reading for its manufacturing index came in at 51.2 last month, compared to the 51.7 recorded in June.
While readings above 50 signal that output in the industry is rising, the July figure still marks the weakest pace of expansion for the gauge since August 2016. It also undershot market expectations for a slight rise to 52.
“Respondents expressed less concern about US-China trade turbulence, but trade remains a significant issue. More respondents noted supply chain adjustments as a result of moving manufacturing from China. Overall, sentiment this month is evenly mixed,” said Timothy R. Fiore, chair of ISM’s manufacturing business survey committee.
The reading comes a day after the Federal Reserve cut its main interest rate for the first time since the financial crisis. While the quarter-point cut was widely expected by economists and investors, comments by chairman Jay Powell that the move was “not the beginning of a long series of rate cuts” surprised investors, who have been betting on a more aggressive pace of easing this year.
The dollar, which earlier hit a 15-month high on the back of the Fed’s unexpectedly more cautious stance, gave back some of its gains after the ISM report to trade less than 0.1 per cent higher at 98.62.
“The current level of the ISM manufacturing composite index is consistent with continued moderation of overall real GDP growth,” said Joshua Shapiro, chief US economist at MFR.