The US manufacturing sector contracted in December at its quickest pace since the financial crisis, undershooting Wall Street forecasts for a slight improvement in conditions. The Institute for Supply Management said on Friday morning its purchasing managers’ index fell to 47.2 in the final month of 2019, from 48.1in November. That was its lowest reading since June 2009. Economists forecast the index would rise to 49, still keeping it below the threshold of 50 that separates economic expansion from contraction.
A year ago, when benchmark US stocks were on the cusp of closing in bear market territory, the ISM’s PMI was at 54.3 in December 2018, before bouncing to 56.6 a month later. Activity in the manufacturing sector tumbled last year as the trade war between the US and China continued, painting it as one of the weaker parts of the domestic economy even while the labour market remained strong and lower mortgage rates spurred a recovery in housing.
Although subindices measuring demand and new orders continued to contract in December, there were some signs of improving sentiment among respondents to the Institute’s survey. “Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the US and China,” Tim Fiore, chair of the ISM Manufacturing Business Survey Committee, said.
“Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest, while Transportation Equipment is the weakest. Overall, sentiment this month is marginally positive regarding near-term growth,” Mr Fiore added.