The U.S. Factory Productions Slow Down, lowering the chance of Inflation

U.S. Factory

As the month of April ended, it was shown that the U.S. factory activity has slowed down, while consumer spending remains unchanged in March. A key inflation measure was recorded its first monthly fall back since 2001, but analysts are still expecting an increase in the interest rate as the labor market tightens in June.

The weak reports came before the Federal Reserve’s two-day policy meeting on Tuesday. The U.S. Central bank is not expecting to raise interest rates at the end of the meeting on Wednesday. The reports did a little to change expectations of a rate hike this June.

A statement was released by the Institute for Supply Management that its index of national factory activity has dropped to as low as 54.4 in the previous month, which is the weakest reading since December from 57.2 in March.

Numbers that read higher than 50 is an indication that an expansion in manufacturing, which interprets that about 12 percent of the U.S. economy.

A statement from Paul Ashworth the chief U.S. economist at Capital Economics in Toronto says that "We don't expect that will prevent the Fed from hiking interest rates again at the June meeting, at least not as long as employment growth rebounds in April and May,"

Consumption will likely be supported by a pick-up in wage growth. A report that was released in Friday showed that the private sector has the biggest increase in 10 years in the first quarter.

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