Factory Activity Slows as Inflation Pressures Subside

U.S. factory activity slowed in April while consumer spending was unchanged in March and a key inflation measure recorded its first monthly drop since 2001, but economists still expect an interest rate increase in June as the labor market tightens.

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

“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,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

The Institute for Supply Management (ISM) said its index of national factory activity dropped to a reading of 54.8 last month,

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