US factory growth is at its slowest for two years, according to figures released by the Institute for Supply Management (ISM) this morning. National factory activity index fell to 51.1 last month, the lowest reading since May 2013, from 52.7 in July.
However, strong auto sales hint that the economy is still on track for growth overall. US auto sales were at their strongest since July 2005, with the annualized selling rate in August well above expectations of 17.3 million, at 17.8 million vehicles.
The sharp slowdown in manufacturing is expected to be caused by the recent volatility in global stock markets, combined with a strong dollar and cutbacks in the energy sector.
Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters:
“It suggests that the recent eruption in uncertainty toward Chinese and global growth is beginning to affect U.S. business decisions. 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.”
