Manufacturing index tumbles
NEW YORK - Signs grew that the economy could turn even weaker in 2009, as an index of December manufacturing activity fell to its lowest point in 28 years. All areas of the sector were down, from bakers to cigarette makers to aluminum smelters.
The Institute for Supply Management, a trade group of purchasing executives, said yesterday its manufacturing index fell to 32.4 in December, a greater-than-expected decline from November's reading of 36.2. Wall Street economists surveyed by Thomson Reuters had expected the reading to fall to 35.5.
Components of the index hit historic lows. New orders fell to their lowest level going back to 1948. Prices fell as the number of respondents saying they had paid more in December than in November sank to its lowest monthly reading since 1949.
A reading below 50 for the overall index indicates contraction. The index, based on a survey of the institute's members, has fallen steadily for five months as the economy deteriorated.
December's reading is the lowest since June 1980, when the economy was near the end of a six-month recession.
If December's rate of manufacturing activity were to persist for 2009, the nation's gross domestic product would show a 2.7 percent contraction, said Norbert Ore, chairman of the group's business survey committee. GDP, the broadest measure of economic activity, decreased at an annual rate of 0.5 percent in the third quarter of 2008, according to the Bureau of Economic Analysis.
Only three recessions in the history of the index have showed weaker manufacturing readings, said John Ryding, of RDQ Economics. Those recessions were in 1948-1949, 1973-1975, and 1980.
The US weakness is part of a worldwide slowdown. China's manufacturing sector, which accounts for 43 percent of that economy, contracted for a fifth straight month in December. Singapore said its economy shrank in the fourth quarter, and South Korea said its exports fell 17.4 percent in December. With European manufacturing indexes also dropping, "the case for a massive global fiscal stimulus continues to grow," Ryding said.
Investors shrugged off the grim report on the first day of 2009 trading, eager to start fresh after the losses of 2008. Stocks closed higher, with the Dow Jones industrial average up 258.30 to 9,034.69. Broader indexes were also higher. 