Arabic version: قوة التصنيع تعمّق ضغوط التضخم على الاحتياطي الفيدرالي
According to Cnbc, the Institute for Supply Management’s July manufacturing survey showed U.S. factory activity expanding at its fastest pace in more than four years, while persistent price pressures added to the challenge facing the Federal Reserve.
The ISM manufacturing index reached 55.6, its highest reading since May 2022 and above Wall Street expectations of 54.0. Readings above 50 indicate expansion. New export orders, backlogs and production improved, with production rising 6.3 points. The employment gauge reached its highest level since August 2022 and expanded for the first time in 33 months, ISM officials said.
However, the prices index only edged down to 71.1, with nearly three-quarters of respondents reporting higher prices. It was the 22nd consecutive month in which the measure indicated rising prices. Survey comments described volatile conditions linked to the Iran war and tariffs. An executive in primary metals said there was “No normalcy in sight in the world of metals,” while a manager in electrical equipment, appliances and components said pricing volatility and lead-time extensions were arguably worse than during the pandemic era.
The report could strengthen the case for an interest-rate increase as soon as September, analysts said, as solid economic activity and continued inflation concerns confront Fed Chairman Kevin Warsh and his colleagues. The Federal Open Market Committee last week kept its key overnight rate in a 3.5%-3.75% range, where it has remained all year. Inflation remained above the Fed’s 2% target despite fairly positive June data.
LPL Financial chief economist Jeffrey Roach said the Warsh-led Fed would be pressured to raise rates on September 16. CME Group’s FedWatch showed odds of an increase at the Sept. 15-16 meeting at 64.5% midday Monday, slightly below Friday’s level. William Blair macro analyst Richard de Chazal said companies continued to complain about pricing conditions, which could tilt the Fed toward tighter policy.
