Investing.com – Activity in the US manufacturing sector registered a larger-than-expected decline in August, according to preliminary data released on Tuesday.
In a report, market research group Markit said that its flash manufacturing purchasing managers’ index (PMI) dropped to 52.1 in August from the prior month’s final reading of 52.9.
Analysts had expected a lesser decrease to 52.7 this month.
On the index, a reading above 50.0 indicates expansion, below indicates contraction.
Despite the worse than expected reading, the market research group noted that production continues to rise solidly.
Although total new order growth slowed, export sales noted their fast increase in nearly two years.
On a down note for the labor market, employment expanded at its slowest pace for four months.
“The August drop in the PMI is a disappointment but less worrying when looked at in the context of July’s better than expected reading,” Markit chief economist Chris Williamson commented.
“Taking the July and August readings together suggests that manufacturing is enjoying its best growth so far this year in the third quarter, and should help drive stronger GDP growth,” he added.
Nonetheless, Williamson suggested that the slowdown in overall order book growth was a warning light that domestic demand had waned this month, while the pull-back in hiring revealed manufacturers’ cautionary outlook.
“Policymakers will therefore be pleased to see signs that the economy may have picked up speed in the third quarter, but the Fed looks unlikely to tighten policy again until the upturn has stronger foundations, suggesting any interest rate rise looks unlikely before December.,” Williamson concluded.
In an immediate reaction, EUR/USD was trading at 1.1326 from around 1.1329 ahead of the release of the data, GBP/USD was at 1.3186 from 1.3187 earlier, while USD/JPY was at 100.07, compared to the prior 100.09.
The US dollar index, which tracks the greenback against a basket of six major rivals, was at 94.39, compared to 94.36 ahead of the report.
Meanwhile, U.S. stocks were trading higher after the open as the Dow 30 gained 90 points, or 0.48%, the S&P 500 rose 10 points, or 0.43% , and the tech-heavy Nasdaq Composite traded up 28 points, or 0.52%.
Elsewhere, in the commodities market, gold futures traded at $1,346.85 a troy ounce, compared to $1,345.75 ahead of the data, while crude oil traded at $46.72 a barrel from $46.78 earlier.