- The ISM Manufacturing Index registered 52.8% in August, equaling its lowest reading since June 2020
- The European Central Bank raised its key policy interest rate to 0.75% from zero
- The Beige Book is published eight times a year by the Federal Reserve
Top Three Market Headlines
Business Surveys Hold Steady: Business activity in the U.S. expanded at a moderate pace in August, according to surveys of executives by the Institute for Supply Management (ISM). The ISM Manufacturing Index held steady at 52.8%, equal to July's reading, which was the lowest level in more than two years. (A reading above 50% indicates expansion of activity, while a sub-50% reading spells contraction.) The services sector, meanwhile, remained more robust, with the ISM Services index hitting 56.9%, little changed from 56.7% in July. While this was the 27th straight month both indices exceeded 50%, they have decelerated sharply over the course of 2022, signaling softening business trends.
ECB Enacts Second Straight Rate Hike: The European Central Bank (ECB) last week raised its key policy interest rate, the deposit facility rate, to 0.75% from zero, furthering its attack on rampant inflation. The decision marked the second consecutive rate hike after officials raised rates by one-half of a percentage point in July. ECB President Christine Lagarde warned that the central bank is serious about combatting inflation and signaled that additional rate increases were likely over the next several meetings. Last week's large hike echoed recent decisions made by other major central banks, including the Federal Reserve.
Beige Book Underscores Waning Growth: The Federal Reserve last week released its most recent Beige Book, a compilation of anecdotal information about current economic conditions collected eight times a year by the 12 Federal Reserve Districts. According to the report, the outlook for future economic growth remains weak, with demand expected to soften over the next six to twelve months. Most Districts reported that consumer spending remained steady since the last report in early July, but that households have shifted spending from discretionary goods to essentials. Price levels remained highly elevated, with significant increases reported for food, rent, and utilities; at the same time, a majority of Districts noted some moderation in the rate of price increases.