U.S. Factories Running Slower Than Expected

New Orders fell and construction spending slowed as U.S. factory activity slipped again in November.  The sobering news followed positive reports on manufacturing, which had led to higher forecasts for GDP growth in the fourth quarter.  Now analysts are so sure.

The Institute for Supply Management (ISM) said its index of national factory activity dropped 0.2 point to a reading of 48.1 last month. A reading below 50 indicates contraction in the manufacturing sector, which accounts for 11% of the U.S. economy.

But sliding under 50 doesn’t signal a recession.  For that to happen, the ISM index would have to fall below 42.9.

Though the ISM said business sentiment had improved, likely as the United States and China inch towards a partial trade deal, November’s reading marked the fourth straight month that the index remained below the 50 threshold.

Economists say without a complete trade deal, manufacturing is unlikely to rebound much and the sector could remain under pressure, with President Donald Trump on Monday restoring tariffs on steel and aluminum imports from Brazil and Argentina.

Manufacturing is also facing challenges from a domestic inventory bloat, slowing profit growth and weak overseas demand.

The moribund manufacturing data puts even more pressure on consumers to carry the economy through the all-important holiday spending season.

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