U.S. Manufacturing has struck a more than two-year low in August, but sturdy gains in automobile sales and construction spending suggested the economy remained on solid footing. The sharp slowdown in manufacturing, which has been hurt by a strong dollar and deep spending cuts in the energy sector, was probably an early indication of fallout from the recent turmoil in stock markets, economists said. And it could bolster the case against the Federal Reserve raising interest rates later this month, they said.
“It suggests that the recent eruption in uncertainty toward Chinese and global growth is beginning to affect U.S. business decisions,” said Millan Mulraine, deputy chief economist at TD Securities in New York. “We look for the Fed to take a pass on raising rates this month as they continue to assess the incoming economic data for any evidence of fallout.” Fed Vice Chairman Stanley Fischer told CNBC last week it was too early to decide whether the stock market rout had made a rate hike this month less compelling. The U.S. central bank’s policy-setting committee meets Sept. 16-17. FULL REPORT