BUSINESS US manufacturing sector hits its lowest point since June 2009

BUSINESS

US manufacturing sector hits its lowest point since June 2009

AFP

10:31, January 04, 2020

The U.S. manufacturing sector contracted for the fifth straight month in December, hitting its lowest point since June 2009, according to an industry survey released on Friday.

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Photo: CGTN

Despite the disappointing result, there are indications an improved trade outlook - after a deal with China, and another with Canada and Mexico - could boost the sector, which has softened for nine months, according to the Institute for Supply Management's monthly survey.

ISM's monthly manufacturing index fell to 47.2 percent, a drop of nearly a full point, and the opposite direction from expectations of economists, who projected a rebound.

Any reading below 50 percent indicates manufacturing is slowing.

"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," said Timothy Fiore, chair of ISM's manufacturing survey.

But last month, only three of 18 key industries showed growth, and comments from survey respondents reflected continued uncertainty about the economic outlook.

"Cautiously optimistic is the rule these days. Sales are decent, but we're wondering what 2020 will bring," said one manager from the transportation equipment industry.

Another noted that more suppliers are passing on increased costs due to tariffs.

"In one line: Ouch. The manufacturing recession continues," said Ian Shepherdson of Pantheon Macroeconomics, calling the details "grim."

The production index plunged nearly six percentage points, and new orders dropped again - both falling to their lowest points since April 2009, the survey showed.

Meanwhile, employment fell 1.5 while the price index jumped five points.

Despite Fiore's hopes for better results in the coming months, analysts at Oxford Economics were skeptical.

"Manufacturing will remain under pressure in 2020. The headwinds of subdued global growth, trade policy uncertainty, and tariffs, along with a strong U.S. dollar, are expected to continue weighing on activity," they said in an analysis.

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