U.S. factory sector in deepest slump in more than 10 years

U.S. factory sector in deepest slump in more than 10 years

U.S. factory sector in deepest slump in more than 10 years

The ISM Manufacturing Index fell for the fifth month in a row to 47.2 in December, down from November's reading of 48.1. Readings below 50 indicate activity is shrinking. That's the weakest reading since June 2009, when it hit 46.3, and well below the 49 reading that economists surveyed by Reuters expected.

"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 US and China", ISM Chair Timothy Fiore said in a statement.

Still, the survey of companies by ISM shows that manufacturers have suffered.

The manufacturing sector previous year was rocked by slower global growth and the escalation of trade tensions between the United States and China.

While the two largest economies of the world announced last month that a phase 1 trade deal has been finalized and is likely to be signed and officialized in January, the announcement came towards the end of the month and failed to stir optimism for December's purchasing managers' index.

While ISM's overall measure of activity in December was the lowest in more than a decade, Fiore said on balance the contraction remains relatively shallow.

"It's not super low", he said on a conference call.

Following the economic data, the U.S dollar index was seen dropping sharply from around 96.70 to 96.45. The 15 industries reporting contraction in December-listed in order-are apparel, leather & allied products; wood products; printing & related support activities; furniture & related products; transportation equipment; nonmetallic mineral products; paper products; fabricated metal products; petroleum & coal products; electrical equipment, appliances & components; textile mills; primary metals; chemical products; plastics & rubber products; and machinery.

Overall, the US economy did appear to be in relatively sound condition near the end of 2019, supported by low unemployment and healthy consumer spending, which accounts for roughly 70% of economic activity. Order backlogs, employment and inventories also dropped, but prices rose.

At this time a year ago, the Fed had wrapped up a year when it had boosted interest rates four times.

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