U.S. factories show vulnerability to chill in global economy

Thu Oct 1, 2015 1:01pm EDT
 
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By Jason Lange

WASHINGTON (Reuters) - The pace of growth at U.S. factories slowed in September, a sign that the chill falling over the global economy could complicate the Federal Reserve's plans to raise interest rates.

Other data on Thursday pointed to a tightening labor market and stronger spending on home construction, highlighting the split in the economy between strong domestic growth and weakness abroad.

This is causing headaches at the Fed, which cited concerns last month about "global economic and financial developments" when it surprised much of Wall Street by holding off on hiking rates.

The Institute for Supply Management (ISM) said its index of national factory activity fell to 50.2, its lowest since May 2013 and just below the median forecast in a Reuters poll.

While any reading above 50 indicates expansion in manufacturing, growth has slowed sharply over the last year as a strong dollar has crimped exports.

More recently, a slowdown in China is dragging on global growth. The ISM's index for exports held steady at 46.5, marking a contraction in activity for the fourth straight month.

The dollar drifted lower while yields on Treasury debt also declined. Wall Street stocks were trading lower.

Despite the weakness abroad, America's domestic economy and the labor market have appeared on more solid footing, which has boosted expectations the Fed could hike rates this year or in early 2016.   Continued...

 
An Airbus A321 is being assembled in the final assembly line hangar at the Airbus U.S. Manufacturing Facility in Mobile, Alabama September 13, 2015. REUTERS/Michael Spooneybarger