December survey of purchasing managers shows first decline in activity in nearly a year sparking debate of whether a recession and more Fed cuts lay ahead.
Manufacturing activity unexpectedly declined for the first time in 11 months in December, a survey of purchasing managers in that sector released Wednesday showed.
The Institute of Supply Management's manufacturing index weakened to 47.7, compared to 50.8 in November. Economists surveyed by Briefing.com had expected the index to show slower growth forecasting a reading of 50.5.
The unexpected weakness in manufacturing came due to a sharp drop in new orders and production. The reading, one of the first looks at the economy in December, raised questions of whether more Federal Reserve rate cuts and possibly a recession were on the horizon.
The tipping point for the index is 50, with a reading above that reflecting growth in the sector. A reading below 50 represents a decline in manufacturing.
The report said slowing demand for products, rather than excess inventories, resulted in manufacturers hitting the brakes during the month.
"December was apparently a very tough month as new orders, production and employment were all below the breakeven mark of 50 percent," Norbert Ore, chairman of the ISM's Manufacturing Business Survey Committee said in a statement. "Industries close to the housing market appear to be struggling more than others, and those involved in exports seem to be doing better."
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