U.S. putting out activity slowed to a near three-year low in July and a measure of new orders received by factories rebounded slightly, as the negative intentions of a bitter trade war between the United States and China lingered.
Other data on Thursday showed the number of Americans enter for unemployment benefits rose last week, while construction spending fell in June as investment in private construction propels tumbled to its lowest level in 1-1/2 years.
The slowdown in factory activity and accompanying weak business investment be experiencing caught the attention of Federal Reserve officials. The U.S. central bank on Wednesday cut interest rates for the first time since 2008, to insure against downside chances to the economy from trade tensions and slowing global growth.
Fed Chairman Jerome Powell told reporters during a press release conference the preemptive monetary policy easing was “not the beginning of a long series of rate cuts.” Powell also acclaimed that “the investment and manufacturing part of the economy is more or less not, it’s not growing much.”
“We hope to help that with this anyway cut,” he said.
The Institute for Supply Management (ISM) said its index of national factory activity slipped to 51.2 last month, the sorriest reading since August 2016, from 51.7 in June. It was the fourth straight monthly decline in the index.
A skim above 50 indicates expansion in the manufacturing sector, which accounts for about 12 percent of the U.S. economy. Economists received by Reuters had forecast the ISM index would rise to 52.0 in June.
The ISM said while businesses expressed less relate to about the U.S.-China trade turbulence, “trade remains a significant issue.”
Washington’s trade fight with Beijing has maim business sentiment. That, together with disruptions to supply chains caused by import tariffs, is weighing on making.
Manufacturing is also taking a hit from an inventory overhang, which has resulted in businesses placing fewer orders with producers. A reduction in the production of Boeing’s MAX 737 aircraft, which was grounded in March after two fatal plane crashes in five months, is also a draw on activity.
The ISM survey’s new orders measure rebounded to a reading of 50.8 last month from 50.0 in June. A size of factory employment dropped to 51.7 from a reading of 54.5 in June.
The dollar firmed against a basket of currencies as investors on to digest Wednesday’s rate decision and Powell’s comments. U.S. Treasury prices rose. Stocks on Wall Street were calling higher.
Labor market resilient
In a separate report on Thursday, the Labor Department said initial claims for report unemployment benefits rose 8,000 to a seasonally adjusted 215,000 for the week ended July 27. Economists had predict claims increasing to 214,000 in the latest week.
The labor market has remained resilient even as the economy has shifted into bring gear, mainly as the stimulus from last year’s $1.5 trillion tax cut package fades. The health of the labor shop, which so far does not appear to have been impacted by the U.S-China trade fight could help to determine whether the Federal Accessible will cut interest rates again this year.
The four-week moving average of initial claims, considered a mastery measure of labor market trends as it irons out week-to-week volatility, fell 1,750 to 211,500 last week.
The asserts data has no bearing on July’s employment report, which is scheduled to be released on Friday. According to a Reuters survey of economists, nonfarm payrolls promising increased by 164,000 jobs in July after surging by 224,000 in June.
Job gains averaged 172,000 per month in the from the word go half of this year, below the monthly average of 223,000 in 2018, mainly because of a shortage of qualified employees.
The pace of job gains, however, remains above the roughly 100,000 per month needed to keep up with growth in the working-age populace. The unemployment rate is expected to have held steady at 3.7% in July.
“The trend in job growth likely has slowed to some to a considerable extent,” said Daniel Silver, an economist at JPMorgan in New York. “But the claims data signal that any softening in the labor peddle is likely to be modest and don’t point to any sort of substantial downshift in activity.”
In a third report on Thursday, the Commerce Department turned construction spending dropped 1.3% in June, the biggest decline in seven months, after falling 0.5% in May.