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U.S. Manufacturing Activity Drops to Lowest in Over a Decade

A worker passes by stocks of aluminium ingot at ” Pechiney ” aluminium factory (Reuters)

Manufacturing activity in the U.S. sank in December to its lowest level in more than a decade as prospects for an end to the long-running trade battle with China remain unclear.

The Institute for Supply Management announced Friday that its manufacturing index fell below expectations last month to 47.2 percent, down from 48.1 percent in November.

The number represents the lowest levels of manufacturing activity since June, 2009 at the very end of the Great Recession, when ISM’s index dropped to 46.3.

An index below 50 percent means the sector is contracting. December marked the fifth consecutive month that manufacturing activity has contracted.

“Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China,” said ISM chair Timothy Fiore.

Slower global economic growth and trade tensions between the U.S. and China contributed to the manufacturing slowdown in the U.S.

President Trump announced Tuesday that the U.S. will sign a “very large and comprehensive” phase one trade deal with China on January 15th, the first step to ending the ongoing tariff war between the world’s two largest economies.

However, economic analysts are still holding their breath on declaring the deal a win for manufacturing until they see the details of the agreement.

China agreed in August to restart trade talks with the Trump administration, prompting the U.S. to agree to delay additional tariffs on hundreds of billions of dollars worth of Chinese products. The U.S. currently has heavy tariffs on $250 billion of Chinese imports, while China has tariffs on $60 billion worth of U.S. products.

Trump campaigned in 2016 on a promise that tariffs would eventually bring back factory jobs to the U.S., but manufacturers have expressed concern recently that they are bearing the brunt of the increased costs that tariffs have caused.

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