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June 1, 2005    

US manufacturing slows

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by Brian Turner
US manufacturing slows

Figures released Wednesday showed that manufacturing in the United States grew at its slowest rate in almost two years last month.

A poor report in this sector was expected after the drop in the Chicago manufacturing activity index announced earlier in the week.

The new report, the ISM index of manufacturing activity for last month, came in at 51.4, down 1.9 points from the previous report but still above the level of 50 that differentiates between expansion and contraction.

Still, reaction to the data sent yields on 10-year US Treasury bonds down 8 basis points to yield 4.9 percent. Yields on 30-year bonds also fell to near a 2-year low of 4.245 percent as dealers reported extremely heavy trading volumes.

The reaction to today’s manufacturing sector figures was amplified by speculation that the Federal Reserve might soon halt its interest rate hikes.

One economist pointed out that since 1989 the Fed has generally stopped hiking interest rates when the ISM hit’s the 53 - 54 level. Additionally, the concern over inflation has been lessening recently, another indication that the Fed might stop raising interest rates.

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