By Geoffrey Smith
Investing.com -- U.S. manufacturing looks likely to have slowed much more sharply than thought over the last month, as a closely-watched regional activity index posted its sharpest fall in over two years in August.
The Empire State Manufacturing index, compiled by the New York Federal Reserve, fell to -31.3 from 11.1 in July, its lowest level since May 2020 and its sharpest monthly drop since the early days of the pandemic.
New orders and shipments plunged, and unfilled orders also declined, albeit less sharply, the NY Fed said. Other evidence of a substantial slowdown included a rise in inventories and a decline in average hours worked.
"Looking ahead, firms did not expect much improvement in business conditions over the next six months," the NY Fed said.
One bright spot was that the subindex for prices paid moved lower, albeit remaining at a historically elevated level.
U.S. bond yields fell in response to the news, as market participants became more confident that the slowdown will force the Federal Reserve to stop raising interest rates next year. By 08:45 ET (12:45 GMT), the yield on the benchmark two-year Treasury note was down five basis points at 3.21%, while the five-year note was down over six basis points at 2.91% and the 10-year note was down six basis points at 2.79%.
The S&P 500 futures contract also fell by 10 points to be down 0.7% from Friday's close in New York.