The Economy

Manufacturing Slump Reaches 5th Straight Month

A gauge of manufacturing activity hit its lowest level in 10 years but the easing of U.S.-China trade tensions may benefit some industries.
Matthew HellerJanuary 3, 2020

The contraction in U.S. manufacturing activity continued in December but the easing of U.S.-China trade tensions may benefit some industries this year, according to the Institute for Supply Management.

The ISM reported Friday that its manufacturing index fell last month to 47.2. — the lowest level since June 2009. A reading below 50 represents contraction.

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Economists polled by Reuters had expected a reading of 49 for December while economists surveyed by MarketWatch had forecast 48.8.

The December decline reflected in part Boeing’s suspension of production of its troubled 737 Max jetliner and the fallout from a recent strike at General Motors, but the report showed broad weakness in manufacturing tied to the ongoing trade war with China.

Only three of the 18 industries tracked by the ISM said their businesses expanded in December, matching the fewest since 2009.

December marked the fifth straight month of contraction for the U.S. manufacturing sector. But as MarketWatch reports, manufacturers are hoping “the first phase of an agreement between the U.S. and China to resolve a damaging trade dispute leads to a further easing of tensions between the world’s two largest economies.”

“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 U.S. and China,” Timothy Fiore, chair of the ISM survey, said in a news release.

The institute’s index for new orders fell slightly to 46.8% in December from 47.2 in November while a gauge of employment slid 1.5 points to just 45.1%.

“The bottom line is that the modest deterioration in December in an already sluggish manufacturing sector is unquestionably a disappointment,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “Even so, activity remains well above levels typically associated with a recession.”