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Financial News: U.S. Manufacturing Index Tumbles To Two-Year Low In

U.S. Manufacturing Index Tumbles To Two-Year Low In December

01/03/2019 - 10:48:00 (RTTNews)

(RTTNews) - Indicating a notable slowdown in the pace of growth in U.S. manufacturing activity in the month of December, the Institute for Supply Management released a report on Thursday showing a much bigger than expected drop by its index of activity in the manufacturing sector.

The ISM said its purchasing managers index tumbled to 54.1 in December after rising to 59.3 in November, slumping its lowest level since hitting 53.4 in November of 2016.

While a reading above 50 still indicates growth in manufacturing activity, economists had expected the index to show a more modest drop to a reading of 57.9.

The much bigger than expected decrease by the headline index partly reflected softening demand, as the new orders index plunged to 51.1 in December from 62.1 in November.

"Customer demand expansion softened quite notably in December, as the index retreated to an expansion level not seen since August 2016," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

The report said the production index also slid to 54.3 in December from 60.6 in November, while the employment index fell to 56.2 from 58.4.

On the inflation front, the prices index tumbled to 54.9 in December from 60.7 in November, dropping to its lowest level since June of 2017.

"The Fed elected to raise rates in December and signal two hikes in 2019 despite recent market turmoil as real economic indicators did not yet reflect the kind of trouble indicated by financial markets," said Chris Low, chief economist at FTN Financial. "Today's ISM manufacturing surprise was a step in the direction of confirmation, though a headline read in the mid-50s is still pretty good."

He added, "Nevertheless, slowing U.S. manufacturing, weakness in leading components like orders and the backlog coupled with an even sharper global slowdown and falling inflation fundamentals certainly make a solid case for taking a break from rate hikes."

Next Monday, the ISM is scheduled to release a separate report on activity in the service sector in the month of December.

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