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January 03, 2019

Study: Growth In U.S. Manufacturing Sector Slows In December

The disappointing performance, along with other concerning economic data, have some analysts fearing a global slowdown.

By  Christopher Ruvo

The manufacturing sector in the United States expanded at its slowest rate in more than two years in December, as growth retreated sharply from November levels, according to a closely-watched survey released Thursday. The news comes within days of separate surveys that showed China’s manufacturing sector contracted for the first time in about two years last month, a consequence of a slowing economy and trade war with the US. The economic data is relevant to the promotional products industry, which typically trends the way of the broader economy.

The Institute For Supply Management said Thursday that its Purchasing Managers Index registered 54.1% for December – a decline of 5.2 percentage points from November.

Similarly, ISM’s New Orders Index tallied 51.1%, down 11 percentage points from the prior month. Notable, too, was the 6.3 percentage-point drop in the Production Index, which read 54.3% for December. Meanwhile, the Prices Index indicated that the cost of raw materials rose for a 34th consecutive month.

While the Purchasing Managers Index’s reading above 50 indicates that the US manufacturing sector still expanded, it did so at a significantly slower rate and at a pace below the expectations of economists, who foresaw a reading of 57.9%.

“Comments from the panel reflect continued expanding business strength, but at much lower levels,” said Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee. “Demand softened…Consumption continued to strengthen, with production and employment still expanding, but at much lower levels compared to prior periods.”

The performance of US manufacturing was one factor that propelled a drop in stocks on Thursday. In the wake of ISM’s survey, the Dow Jones Industrial Average was trading about 500 points lower.

ISM’s report comes amid other disappointing economic data that some analysts fear signals a global slowdown or downturn. In addition to China’s manufacturing contraction, manufacturing growth also slowed in India. Stocks took it on the chin after Apple reported that its fourth quarter revenue will fall short of projections, coming in at about $84 billion instead of the $89 billion to $93 billion forecast. China’s sputtering economy was behind the disappointment for Apple.

As Ben Chu noted for The Independent, the MSCI World Index of shares has slid 15% since September, concluding 2018 down more than a tenth from where it started. US growth is expected to slow from 2.9% in 2018 to 2.5% this year, while economic expansion projections in top economies – including Germany, France, China, Brazil and India, to name some – have been downgraded. The trade war between China and the US – the world’s two largest economies – along with the United Kingdom’s “Brexit” from the European Union are among the key factors impacting the global economy, analysts say.

“The expansion may have peaked,” said the International Monetary Fund. “We have had a good stretch of solid growth by historical standards, but now we are facing a period where significant risks are materializing and darker clouds are looming,” Christine Lagarde, the fund’s managing director, was quoted as saying.

Even so, the International Monetary Fund is still projecting that global growth will reach 3.7% this year – the same as in 2017 and 2018.