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US manufacturing sector shrinks further in January, shows ISM

US manufacturing contracted further in January as higher interest rates stifled demand for goods, but factories do not appear to be laying off workers in large numbers.

The Institute of Supply Management (ISM) said on Wednesday that its manufacturing PMI fell from 48.4 in December to 47.4 last month.

The third consecutive monthly contraction pushed the index to the lowest level since May 2020 and below the 48.7 mark, considered consistent with a recession in the wider economy.

Economists polled by Reuters had predicted the index would fall to 48.0. A PMI reading below 50 indicates contraction in manufacturing, which accounts for 11.3% of the US economy.

The Federal Reserve’s fastest interest cycle since the 1980s to fight inflation is reducing demand for goods, which are mostly bought on credit.

Past appreciation of the dollar against the currencies of the United States’ major trading partners and a slowdown in global demand are also hurting manufacturing.

The ISM new orders sub-index fell to 42.5 in January from 45.1 in December. It was the fifth consecutive month in which this measure retreated. Weakened demand and improved supply of raw materials reduced the backlog of unfinished work in factories.

Source: CNN Brasil

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