The US manufacturing sector contracted in December by the most in more than a decade with order volumes crashing to near an 11-year low and factory employment falling for a fifth straight month, according to an industry report released on Friday.
The Institute for Supply Management (ISM) said its index of national factory activity fell to 47.2 last month from 48.1 in November. It was the lowest reading since June 2009 and thwarted expectations for a levelling off in the pace of decline in a sector buffeted by the US-China trade war.
A reading above 50 indicates expansion in the manufacturing sector and a reading below 50 indicates contraction. Economists polled by Reuters had been looking for a tick up to 49.0.
The manufacturing sector had been under pressure for much of the second half of 2019, as tit-for-tat tariffs between Washington and Beijing slowed the flow of goods between the world’s two largest economies and contributed to a cooling in the pace of global economic growth.
Last month, the sides announced they had reached agreement on a Phase 1 deal that appears to have eased tensions for now, and Trump this week said the accord would be signed on Jan 15 in Washington.
Still, the deal appears to have been reached too late in the month to have fueled the hoped-for reversal in the factory sector’s slowdown. Key sub-indexes of activity in the ISM series notched multi-year lows last month.
ISM’s employment index fell to 45.1 in December from 46.6 in November, the lowest reading since January 2016. And new orders dropped to 46.8, the lowest since April 2009, from 47.2.
The prices paid index, however, registered its first reading above 50 since May, rising to 51.7 from 46.7 the month before.
