U.S. Factory Activity Drops due to Stronger Dollar, Reduced Demand

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U.S. Factory Activity Drops due to Stronger Dollar, Reduced DemandU.S. factory activity declined more than projected in September despite increased pace of hiring in the private sector, indicating that economic growth remains uneven.

The Institute for Supply Management reported on Wednesday that its gauge of national manufacturing activity fell to 56.6 in September, its weakest level since June, compared with 59.0 in August. Economists in a Reuters poll had expected it to drop to 58.5.

An index of fresh orders dropped to 60.0 from August’s reading of 66.7.

The data follows a series of warnings by analysts that the U.S. factories may see demand for their products drop due to a stronger dollar and soft global demand.

However, while the ISM index fell, it still remains above the 50 level which divides growth from contraction, indicating the economy is growing stronger. Most analysts are of opinion that the economy is expanding faster than the estimated median of 2.2 percent over the prior two years.

“It still looks as though overall GDP growth in the third quarter was around 3.5 percent,” Paul Dales, a London-based economist at Capital Economics, told Reuters.

The decline in U.S. manufacturing growth compares with the August figure that was the highest since March 2011.

Meanwhile, payrolls processing firm ADP reported that U.S. private sector absorbed 213,000 workers in September, exceeding economists’ forecasts. The government is expected to release its own payrolls report this Friday that tracks both public and private hiring figures. Analysts predict the report will show that employers hired 215,000 workers in September. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com