Data from IHS Markit showed a U.S. business activity index dropping from 52.6 in July to 50.9, slightly above the 50 level that separates growth from contraction, after manufacturing activity slowed to the lowest since September 2009. Both domestic demand and orders from overseas shrank this month by the most in a decade.
"August›s survey data provides a clear signal that economic growth has continued to soften in the third quarter", said Tim Moore, an economist at IHS Markit.
The yield on the 10-year Treasury note fell and the dollar declined, while stocks pared gains after the figures were released.
Global central bankers meet at Jackson Hole, Wyoming, for their annual gathering on Friday, and markets will be looking for any signals from there. By contrast, the services sector is more robust across the board. IHS Markit says the slowdown indicates a pessimistic outlook on demand, causing a reduction in inventories.
"Germany remains a two-speed economy, with ongoing growth of services just about compensating for the sustained weakness in manufacturing", Smith said.
The flash composite output index rose to 51.4 in August from 50.9 in July.
The German economy contracted 0.1% in the April-June period due to a plunge in exports, and sentiment indicators are suggesting hardly any improvement for the three months from July to September.
The weak PMI means new orders received by manufacturers has plummeted the most in 10 years.
The composite index of factory activity dropped to minus 6 from minus 1 in July. Thirty-year debt sold for a record-low yield of -0.11% at an auction on Wednesday but raised only 824 million euros versus a target of 2 billion euros. The Kansas City Fed's district encompasses Kansas, Colorado, Nebraska, Oklahoma, Wyoming, western Missouri and northern New Mexico. Analysts also say the tit-for-tat tariffs between the USA and China are also having an impact.
Analysts said this drop was one of the most concerning aspects of the new data.
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