Factory Activity Slips as Output Hits Slowest Pace in 10 Months

Tuesday, 03 Sep 2013 09:21 AM

 

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U.S. manufacturing activity eased in August as output grew at the slowest pace in 10 months, but demand picked up and inventories fell, suggesting growth may soon speed up, an industry report showed on Tuesday.

Financial data firm Markit said its final U.S. Manufacturing Purchasing Managers Index fell to 53.1, below July's reading of 53.7 and the initial August reading of 53.9.

Output fell to 52.5 from 54.8 in July, marking the slowest pace of growth since October of 2012. Firms took on more workers for the second straight month, though the pace of hiring was little changed from July.

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New orders, however, rose to 55.7, marking the fastest rate of growth in seven months. The sub-index was at 55.5 in July. Exports continued to grow, though at a slightly slower pace.

"At the same time, inventories of finished goods showed the largest fall since 2009 as some companies reported that demand often exceeded production," said Markit chief economist Chris Williamson. "Factories will need to ramp up production to replace depleted inventories given this order book growth."

However, the overall survey "is still consistent with only very modest growth of factory output and hiring, suggesting policymakers will remain nervous about the on-going fragility of the economy," he added.

Overall U.S. economic data has painted a mixed picture of late, injecting uncertainty into forecasts of when the Federal Reserve could start winding down its monetary stimulus.

Markets still expect the Fed to begin trimming its monthly bond purchases this month, but recent weak data on home sales, personal spending and durable goods orders have clouded the outlook some, as have the possibility of military strikes against Syria that have roiled markets around the world.

However, the government recently reported that the economy grew at a faster-than-expected 2.5 percent clip in the second quarter, and economists expect continued improvement in the labor market and an ongoing housing recovery to contribute to stronger growth in the second half.

Editor’s Note: New Video: Obama Plans to Redistribute Seniors’ Wealth

© 2014 Thomson/Reuters. All rights reserved.

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