Manufacturing data in August weakens, exacerbating market concerns about the slowdown in the U.S. economy

Based on multiple manufacturing indicators, U.S. factories continued to slow down in August, raising concerns about the economic outlook. According to the latest information from the Wise Finance app, the monthly survey of purchasing managers by the Institute for Supply Management (ISM) showed that only 47.2% of respondents reported an expansion in economic activity this month, which is below the breakeven point of 50%. Although this data is slightly higher than July's 46.8%, it is still below the Dow Jones consensus expectation of 47.9%. Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee, stated, "While still in contraction territory, U.S. manufacturing activity slowed its pace of contraction compared to the previous month. Demand remains weak, output is declining, and input remains loose." He added, "Due to current Federal Reserve monetary policy and U.S. election uncertainty, businesses have a low willingness to invest in capital and inventory, and demand remains subdued." Although the index level indicates that manufacturing is contracting, Fiore pointed out that any reading above 42.5% usually indicates an expansion of the broader economy. Another weak economic reading increases the likelihood of the Federal Reserve cutting interest rates by at least 25 basis points later this month. According to CME Group's FedWatch tool, after the ISM report was released, traders increased the probability of a more aggressive 50 basis point rate cut to 39%. According to the survey, the employment index in August rose slightly to 46%, while inventories surged to 50.3%. In terms of inflation, the price index edged up to 54%, which may cause some hesitation when the Federal Reserve decides on the extent of the rate cut. ISM's results are supported by another Purchasing Managers' Index (PMI) data from S&P, which shows a decrease from 49.6 in July to 47.9 in August. S&P's employment index saw its first decline this year, while input costs rose to a 16-month high, further indicating that inflation has fallen far below its mid-2022 peak but still exists. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated, "The further decline in the PMI indicates that the manufacturing sector's drag on the economy intensified in the mid-third quarter. Leading indicators suggest that this drag may intensify in the coming months."