US manufacturing contracts on sluggish global growth

Manufacturing in the US contracted in December at the fastest pace in more than six years as factories, hobbled by sluggish global growth, cut staff at the end of 2015.

The Institute for Supply Management’s index declined to 48.2, the weakest since June 2009, from 48.6 a month earlier, the Tempe, Arizona-based group’s report showed on Monday. Readings lower than 50 indicate contraction. The median forecast in a Bloomberg survey of 72 economists was 49.

"Manufacturing's struggles are going to extend into 2016," Ryan Sweet, a senior economist at Moody's Analytics said before the report. "We still have the stronger dollar and there's been another leg down in energy prices."

Struggling overseas demand and declines in commodity prices that are hurting investment in energy and agriculture continue to limit orders for American manufacturers.

At the same time, robust domestic growth buoyed by labour-market momentum and burgeoning wage gains are supporting consumers’ spending power and preventing US factory activity from slowing even more.

Estimates for the manufacturing index from economists in the Bloomberg survey ranged from 46.6 to 51. Factories globally ended the year on a weak note, contributing to a selloff in stocks worldwide on Monday.

Manufacturing in China contracted in December for a fifth consecutive month as the world’s second-largest economy is poised to grow in 2016 at the slowest pace since 1990.

In the UK, manufacturing unexpectedly cooled in December, suggesting it made little contribution to the economy in the final quarter of 2015.

The euro area provided one bit of good news as the region’s factories expanded in December at the fastest pace in 20 months. Manufacturing grew in all nations covered, including Greece, for the first time since April 2014.

While the US ISM’s gauge of new orders improved to 49.2 last month from 48.9 in November, it still showed bookings were falling. Order backlogs thinned to the smallest in three years.