U.S. manufacturing activity slowed to a near three-year low in July and a measure of new orders received by factories rebounded slightly, as the negative effects of a bitter trade war between the United States and China lingered.
Other data on Thursday showed the number of Americans filing for unemployment benefits rose last week, while construction spending fell in June as investment in private construction projects tumbled to its lowest level in 1-1/2 years.
The slowdown in factory activity and accompanying weak business investment have caught the attention of Federal Reserve officials. The U.S. central bank on Wednesday cut interest rates for the first time since 2008, to insure against downside risks to the economy from trade tensions and slowing global growth.
Fed Chairman Jerome Powell told reporters during a news conference the preemptive monetary policy easing was “not the beginning of a long series of rate cuts.” Powell also noted that “the investment and manufacturing part of the economy is more or less not, it’s not growing much.”
“We hope to help that with this rate cut,” he said.
The Institute for Supply Management (ISM) said its index of national factory activity slipped to 51.2 last month, the lowest reading since August 2016, from 51.7 in June. It was the fourth straight monthly decline in the index.
A reading above 50 indicates expansion in the manufacturing sector, which accounts for about 12 percent of the U.S. economy. Economists polled by Reuters had forecast the ISM index would rise to 52.0 in June.
The ISM said while businesses expressed less concern about the U.S.-China trade turbulence, “trade remains a significant issue.”
Washington’s trade fight with Beijing has hurt business sentiment. That, together with disruptions to supply chains caused by import tariffs, is weighing on manufacturing.