Washington. US manufacturing activity – the sector most closely linked to Mexican exports – slowed more than expected in June, while a reading of new orders pointed to the first contraction in two years, in additional evidence that the world’s largest economy is slowing, amid a sharp reversal of monetary policy tightening from before. Federal Reserve.
The Institute for Management and Supply (ISM, for its English acronym) reported on Friday that the national factory activity index fell to 53 points last month, the lowest reading since June 2020, when the sector recovered from a downturn. .
This number came after a reading of 56.1 in May. A mark above 50 indicates expansion in manufacturing, which accounts for 11.8% of the US economy. Economists polled by Reuters had expected the index to fall to 54.9.
Although part of the moderation in factory activity reflects a shift in spending from goods to services, it is in line with recent data showing that higher rates reduce demand. Consumer spending rose modestly in May as new homes, building permits and factory production weakened.
Last month, the Fed raised the interest rate by three-quarters of a percentage point, the largest increase since 1994, to quell high inflation. An interest rate hike of the same size is expected in July.
The sub-index for futures new orders in the ISM survey fell to 49.2 from a reading of 55.1 in May. Despite the first drop below the 50 level since May 2020, manufacturers are out of business to keep factories running.
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