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US manufacturing slumps to 1980 low: ISM - Printable Version

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US manufacturing slumps to 1980 low: ISM - Naveed Yaseen - 01-03-2009 08:14 AM

WASHINGTON: US manufacturing contracted for the fifth consecutive month in December to a 1980 low amid a sharp Asian slowdown and deepening recession in the world’s biggest economy, a survey showed Friday.

The Institute of Supply Management (ISM) said its key manufacturing index dropped 3.8 percentage points from November to 32.4 per cent, far below the 50 per cent level that separates expansion and contraction. It was below the economists’ consensus estimate of 35.4 per cent and, according to the institute, the lowest reading since June 1980, when the index hit 30.3 per cent.

The machinery market in Asia had virtually shut down, respondents told a survey by the institute, which is a top supply management group based in Tempe, Arizona.

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

“Manufacturing activity continued to decline at a rapid rate during the month of December,” ISM said in a statement.

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

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 US 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 Friday.

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