“The ISM manufacturing index has come in at 49.1 for August versus 51.2 in July. This is the first sub-50 reading (the expansion/contraction boundary) since August 2016 and is the weakest figure since January 2016,” notes ING’s Chief International Economist, James Knightley.
Key quotes
“It is important to remember that the Institute of Supply Management suggests that a reading above 42.9 “generally indicates an expansion of the overall economy”, and given the clear strength of the consumer sector the US economy appears to be some way off a recession for now.”
“Given the potential for the slowdown to spread to other sectors (weaker equity markets hurting consumer sentiment, negative yield curve curtailing credit supply from the banks, for example) and the fact other major central banks are moving in the direction of policy loosening, which is pushing the dollar higher, we look towards the Fed to offer more support to the US economy.”
“We expect 25bp interest rate cuts at both the September and the December FOMC.”
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