Equity markets across the world traded down last week. Two major economic indicators for the US that were released show that the US economy may contract sooner and stronger than expected.
Many investors are nervous that the decision by the US Federal Reserve (Fed) on interest rates is too late and is behind the cycle. It is feared that even if the US lowers rates over two weeks, it will have a limited effect on its economy that moves towards lower growth and higher unemployment.
On Wednesday, it was announced that manufacturing production in the US dropped by 0.3% from the previous month in July of 2024. The US Institute for Supply Management (ISM) announced that: Economic activity in the manufacturing sector contracted in July for the fourth consecutive month and the 20th time in the last 21 months.
Its manufacturing Purchasers Managers Index (PMI) came down to 46.8% in July, from 48.5% recorded in June. On Friday, the US non-farm payrolls for August showed that the US economy is creating less and less jobs. Non-farm employment increased by 142 000 during August and below the 161 000 that was expected.
Although the unemployment rate contracted to 4.2%, as was expected, the US Bureau of Labour Statistics (BLS) made substantial downward revisions of 25 000 on the July number and 61 000 on the June data.
