U.S. factories are slowing faster than anticipated as today’s reading of the IHS Markit manufacturing Purchasing Managers’ Index (PMI) slipped to 49.9 from a final July reading of 50.4. 50 is recognized as the dividing line between expansion and contraction. A downward trend remains intact as the index has declined five points since this year’s peak in January, according to the report which also showed the largest contraction in a decade for domestic orders and bookings from abroad. The IHS Markit Purchasing Services Managers’ Index, which gauges the activity of service providers, fell to 50.9 from 53 in July and matched the lowest since February 2016.
These releases underscore the challenges the Fed faces as it goes into its annual conference in Jackson Hole, Wyoming. Chairman Jerome Powell will address the conference tomorrow and is likely going to reiterate that while the consumer remains strong, the bifurcated economy is showing some weaknesses due to the global slowdown and continued trade tensions. Mr. Powell will likely hint that the Fed stands ready to reduce interest rates further.
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