U.S. manufacturing activity slowed sharply to a two-year low in December amid a plunge in new orders and hiring at factories, suggesting the economy was probably not immune to slowing growth in China and Europe.
This story by Lucia Mutikani originally appeared on Investing.com.
The Institute for Supply Management (ISM) survey published on Thursday offered a downbeat assessment of the manufacturing sector, with almost all components declining last month. Concerns about the economy’s health are escalating despite the labor market remaining strong.
“The economy is just going to be spinning its wheels with subpar growth in 2019 if the purchasing managers report is to be believed,” said Chris Rupkey, chief economist at MUFG in New York. “New orders have dried up and this will take a toll on business investment and growth in 2019.”
ISM said its index of national factory activity tumbled 5.2 points to 54.1 last month, the lowest reading since November 2016. The drop was the largest since October 2008, when the economy was in the throes of a recession. A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. economy.
The ISM's new orders sub-index plunged 11 points to 51.1 last month, the lowest reading since August 2016. The survey's factory employment measure dropped to 56.2 in December from 58.4 in the prior month.
U.S. stocks extended losses on the weak ISM survey, with the Dow Jones Industrial Average falling more than 600 points at one point. The dollar dropped against a basket of currencies, while U.S. Treasury yields fell.
The sharp stock market sell-off has raised the specter of a significant slowdown in growth this year, though economists see no recession.