The US economy is slowing, according to a monthly index released Monday, increasing the likelihood that policymakers will cut interest rates next month. The Chicago Fed's National Activity Index fell slightly to minus 0.19 in July from a downwardly revised minus 0.18 in June. A reading below zero indicates slower growth than the long-term average.

Employment indicators remained negative on the index, a fresh sign of fragility in the US labor market. This weakness is one of the main reasons for a rate cut at the Fed's policy meeting next month. Central bank Chairman Jerome Powell last week noted less encouraging trends in the country's labor market.

That "may require an adjustment in our policy stance," Powell said in a speech at the Jackson Hole economic meeting in Wyoming on Friday. Most investors now expect the Fed to cut its main lending rate by a quarter point in September, according to LSEG Refinitiv data. This would be the first rate cut since last year.

Two other categories measured by the Chicago Fed index were also negative in July, while one other category, personal consumption and housing, contributed neutrally to the overall reading, highlighting the lack of broad momentum in the economy.

The index's three-month moving average rose to minus 0.18 from minus 0.26 in June, while the diffusion index - which measures how much monthly changes are spread among individual indicators over three months - rose to minus 0.31 from minus 0.40 in June. (alg)

Source: Dow Jones Newswires