US manufacturing hits two-year low in December

US manufacturing hits two-year low in December

US manufacturing
A US factory. (File photo: AFP/Robyn Beck)

WASHINGTON: The key US manufacturing sector unexpectedly hit a two-year low in December amid a worrying slump in demand and weak exports, a private survey showed on Thursday (Jan 3).

While the Institute for Supply Management's monthly report showed US industry was still expanding, analysts said the monthly slowdown showed activity had unmistakably fallen a notch below prior trends.

Wall Street has tumbled in recent months as investors begin to fear 2019 will see weaker growth or even a recession and the news accelerated a sell-off on major stock market indices on Thursday.

ISM's manufacturing index fell to 54.1 points, down 5.2 points from November and the lowest level since November 2016. Economists had called for a result of 57.8 and any level above 50 indicates growth.

The survey showed slowdowns in production, deliveries and employment. But the largest dip was in orders, which fell 11 points from November and dragged the overall index lower.

"I think generally there's an overall softening in the global market and we're being impacted by the export piece of it," Timothy Fiore, chairman of the ISM manufacturing survey committee, told reporters.

"I'm not going to say one point is going to provide a trend but we had been bouncing across the top and now we've clearly stepped down a level and we'll see what January brings."

Fiore said survey respondents noted slowing sales to China and Europe, which exchanged tit-for-tat tariffs with Washington in 2018.

Six of 18 industries contracted, including fabricated metals, a sector hit-hard by US President Donald Trump's trade war.

Fiore said the December results "came out of left field," given that a semi-annual survey released last month had shown continued optimism.

"There was no real indication that this was brewing."

A survey respondent in the computer and electronics sector said growth "appears to have stopped" while companies work to adjust to the trade war with China.

About 35 per cent of general comments were related to tariffs, in line with prior months, according to Fiore.

Economist Joel Naroff said the ISM numbers added to the picture of an economy that was moderating after the "sugar high" of the 2017 tax cuts.

"The so-called 'Trump Bump' that was seen in the markets and manufacturing has been largely wiped out," he said in a client note, adding that this more likely pointed to a return to normal growth rather than a recession.

"We seem to be replacing the irrational exuberance of the election and tax cuts with an irrational despondence of a slowing economy."

Source: AFP/de

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