Shock data drop raises fears of US rate rise delay

A shock drop in US manufacturing data has raised concerns that the Federal Reserve will delay any interest rate hike.

The data from the Empire State index, which measures manufacturing in the US, showed a -14.9 measure for August, a sharp drop from the positive 3.9 measure in July. The reading was the lowest since the 2008-09 recession.

Experts now fear the fall will prompt a data-dependent Fed to delay a rate hike until late this year.

Many market watchers had expected a Fed rate hike in September, with the UK following not long after. 

More data is expected this month, including local and national data on manufacturing and production. 

If that data also shows sharp falls ”we’d definitely be starting to talk about whether there’s a reason to be concerned and it would begin to become an issue the Fed started talking about as well,” Bruce Kasman, head of economic research at JP Morgan, told City AM.

A hike in September “is a close call,” adds Kasman, “and when it’s a close call the incoming data has the potential to influence the decision”.

However, on the more positive side US homebuilder sentiment hit a post-recession high, with a rise in the National Association of Home Builders/Wells Fargo Housing Market Index, which buoyed the prospects of a rate rise and pushed the dollar up.