US manufacturing contraction speeds up

Prolonged trade negotiations between US and China have taken a toll

Manufacturing slowdown in US has reignited Wall Street’s concerns over the fallout from US-China trade tensions.

Manufacturing slowdown in US has reignited Wall Street’s concerns over the fallout from US-China trade tensions.

 

The US manufacturing sector contracted at a slightly faster rate in November, confounding economists who anticipated a rebound in factory activity, reigniting Wall Street’s concerns over the fallout from US-China trade tensions.

The Institute for Supply Management said in its monthly survey the index measuring domestic factory activity fell to 48.1 last month from 48.3 in October, amid weakness in new orders and exports.

It was the fourth consecutive month of contraction in the sector, while economists expected ISM’s manufacturing index to hit 49.2, according to a Thomson Reuters poll. A reading below 50 indicates contraction.

Timothy Fiore, chair of ISM’s manufacturing business survey committee, said sentiment improved month-to-month but remains neutral regarding near-term growth. “Global trade remains the most significant cross-industry issue,” Mr Fiore said.

US manufacturers have come under pressure amid slower growth globally, while prolonged trade negotiations between the US and China have weighed on the economic outlook.

Orders

ISM’s sub-index for new orders matched an August reading of 47.2, which was the lowest in seven years. “This measure continues to indicate that capital goods orders are likely to be weak in coming months,” said Joshua Shapiro, chief US economist at MFR.

The manufacturing sector’s struggles contrast with the larger services sector, whose growth accelerated in October versus the prior month, and upbeat consumer spending signals, creating a mixed bag of US economic data.

Also on Monday, the Census Bureau said construction spending in October fell 0.8 per cent compared with September levels, an unexpected fall amid economists’ forecast for a 0.4 per cent increase.

Stocks sold off while bond prices rose, sending yields lower, in reaction to the glum data. The S&P 500 was down 0.7 per cent, and the tech-heavy Nasdaq Composite fell 1.1 per cent. The yield on the 10-year Treasury yield was up 6.2 basis points at 1.8380, below its highs for the day. The US dollar index dropped 0.3 per cent. – Copyright The Financial Times Limited 2019