[News] U.S. Manufacturing PMI Drops to Eight-Month Low, Reflecting Weak Demand and Output

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The Institute for Supply Management (ISM) released the Manufacturing Purchasing Managers’ Index (PMI) for July on August 1st. The report indicated that the Manufacturing PMI was 46.8 in July, down from 49.3 in June and below the market expectation of 48.8. This marks the fourth consecutive month of decline, reaching the lowest level in eight months.

This decline reflects weakening demand and slowing production. The New Orders Index dropped from 49.3 to 47.4, indicating a continuous decrease in order volumes and a further move into contraction territory. The Production Index also fell from 48.5 to 45.9, showing that manufacturing output is slowing down. Additionally, the Employment Index saw a sharp decline from 49.3 to 43.4, signaling a deterioration in manufacturing employment, with companies resorting to more layoffs in response to weak demand.

Overall, the high-interest-rate environment has increased financing costs for businesses, reducing their investment appetite, while also suppressing consumer spending. However, with the Federal Reserve potentially initiating rate cuts in September, some relief for businesses and consumers may be on the horizon.

Nevertheless, even with rate cuts, interest rates are expected to remain elevated, meaning that businesses will still face considerable challenges. Manufacturing is likely to remain subdued in the short term, and economic growth momentum will continue to slow down.

 

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