Economic activity in the manufacturing sector slowed significantly in the United States in December, according to the Purchasing Managers Index (PMI) released by Institute for Supply Management (ISM) on Thursday.
In December, the PMI dropped by 5.2 percentage points to 54.1 percent from the November reading of 59.3 percent, ISM reported. A PMI reading over 50 indicates an expansion in the manufacturing sector.
Meanwhile, ISM reported that the new orders index tumbled by 11 percentage points to 51.1 percent compared to the previous month, while the customers' inventories index rose by 0.2 percentage point to 41.7 percent.
Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said that the retreat of the new orders index and the low customers' inventories index was still a positive sign for the first quarter of 2019, but signaled that "demand softened."
Over the month, the production index fell by 6.3 percentage points to 54.3 percent, as employment index decreased 2.2 percentage points to 56.2 percent in December, said ISM.
"Consumption continued to strengthen, with production and employment still expanding, but at much lower levels compared to prior periods," said Fiore.
Besides, supplier deliveries index decreased by 5 percentage points to 57.5 percent from previous month in December, while the index that measures inventories decreased by 1.7 percentage points to 51.2 percent.
Meanwhile, imports Index registered a decrease of 0.9 percentage point to 52.7 percent in December, according to ISM.
"Inputs, expressed as supplier deliveries, inventories and imports, softened as well, with suppliers improving delivery performance, and inventories and imports declining," said Fiore.
New export orders index registered 52.8 percent in December, 0.6 percentage point higher compared to that of November. In the meantime, the prices Index fell 5.8 percentage points to 54.9 percent.
"Exports continue to expand, but at low levels consistent with November. Price increases relaxed to levels not seen since June 2017, when the index registered 53 percent,"Fiore said.
A separate estimate of the PMI from financial data firm IHS Markit also showed that the U.S. manufacturing PMI dropped nearly 2 points to 53.8 in December, which represented a 15-month low for the index.