
ISM reveals U.S manufacturing activity to have contracted the most in over a decade
- ISM reveals U.S manufacturing activity to have dropped to 47.2 in December.
- Analysts cite the trade war to have contributed to the worst manufacturing PMI in over a decade.
- All of the ISM's sub-indices except prices paid index contracted in December.
- U.S dollar index dropped sharply following the economic data, fueling an upward rally of around 40 pips in EUR/USD.
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The Institute of Supply Management (ISM) announced December’s Purchasing Managers’ Index (PMI) for the United States of America on Friday. Missing analysts’ estimate and printing significantly lower than the figure for last month, the economic data caused the U.S dollar to lose traction in the forex market.
As per the report, manufacturing activity in the U.S contracted last month at the fastest pace in over a decade. ISM highlighted that factory employment in the country dropped for the fifth month in a row while order volumes were recorded the worst in the past 11 years.
ISM Announces U.S Manufacturing PMI At 47.2 In December
Copy link to sectionISM announced U.S manufacturing PMI at 47.2 in December. The figure was posted at a much higher 48.1 in November. In a previous estimate, analysts had expected the manufacturing activity to improve to 49.0 in December. Noting 47.2, well below the neutral mark of 50, the economic data earlier today, testified to the damaging effects of the U.S – China trade war on the U.S economy at large. December’s reading for U.S manufacturing PMI, as per ISM, is the lowest since June 2009 when the economy was struggling to recover from the market crash.
Owing to the punitive tariffs that the U.S and China continued to impose on each other’s products for much of 2019, the second half of the last year failed to bring good news for the U.S manufacturing sector. The ongoing trade war, as per the analysts, has contributed the most to weighing on December’s manufacturing PMI.
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. ISM’s sub-indices also registered multi-year lows in December. For instance, December’s 45.1 for employment index was the lowest since January 2016 while new orders at 46.8 marked the lowest level since April 2009.
Prices Paid Index Is The Only Sub-Index That Turned Green In December
Copy link to sectionThe only sub-index that turned green in December was the prices paid index that climbed above the neutral mark of 50 and printed 51.7 for December. The figure was the best announced since May 2019. Prices paid index was hanging significantly lower at 46.7 in November.
Following the economic data, the U.S dollar index was seen dropping sharply from around 96.70 to 96.45. EUR/USD, on the other hand, gained around 40 pips in the forex market hiking from around 1.1135 to 1.1175 level.
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