Market Insider

Shrinking manufacturing activity surprise blow to economy, market shifts on Fed

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How the Fed reacts to slowing manufacturing data

A shocking contraction in August manufacturing activity pushed back some market expectations that the Fed could hike rates in September and raised new questions about the health of the economy.

The ISM manufacturing survey fell to 49.4 when it was expected at 52. Any reading below 50 is a sign of contraction.

"It's nasty. It really is a tale of two economies still. That's the issue. The consumer is doing fine," said Diane Swonk, CEO of DS Economics. "It's not going to determine what the Fed does. It's a signal that we've already seen ... that the manufacturing sector continues to struggle." Swonk said she was also watching August auto sales Thursday as a gauge of consumer spending, and they were expected to decline 3 percent.



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