U.S. Manufacturing Slumps to 1980 Low

Jan. 3, 2009
New manufacturing orders have contracted for 13 consecutive months

A survey by The Institute of Supply Management (ISM) showed that U.S. manufacturing contracted for the fifth consecutive month in December amid a sharp Asian slowdown and deepening recession in the world's biggest economy.

ISM said its key manufacturing index dropped 3.8 percentage points from November to 32.4%, far below the 50% level that separates expansion and contraction. It was below the economists' consensus estimate of 35.4% and the lowest reading since June 1980, when the index hit 30.3%.

A reading above 50% indicates that the manufacturing economy is generally expanding while that below 50% signals it is generally contracting.

"The decline covers the full breadth of manufacturing industries, as none of the industries in the sector report growth at this time," said ISM.

New manufacturing orders, captured by another ISM index, have contracted for 13 consecutive months, and are at the lowest level on record going back to January 1948, the institute said. Manufacturers, it said, were reducing inventories and shutting down capacity to offset the slower rate of activity caused by a prolonged recession.

In the machinery sector, respondents to an ISM survey said Europe "has slowed down dramatically, while Asia -- particularly China -- has virtually shut down."

Analysts pointed out that there was no sign that the U.S. industrial activity decline was easing, citing the new numbers. "Notably, there is no sign in the December report that the pace of manufacturing decline is yet bottoming," said Peter Kretzmer, senior economist with Bank of America.

Eurozone manufacturing activity fell to a record low in December while China's manufacturing sector is close to a technical recession after output contracted at a record pace in the last month of 2008, according to figures released on Jan. 2.

Copyright Agence France-Presse, 2009

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