US manufacturing contracts amid global slow down

Factory worker Image copyright Getty Images

US manufacturing shrank by the greatest amount for six years in December.

Slowing growth overseas, a stronger US dollar and low oil prices all weighed on factory production, according to the Institute for Supply Management.

Production on the ISM index slipped from 48.6 in November to 48.2. Any number below 50 indicates factory activity is contracting.

The US data coincided with data showing a decline in Chinese manufacturing that spooked global markets on Monday.

The Dow Jones was down nearly 400 points in morning trading.

"I think this downward trend is pretty well established and the fundamentals behind it are well established," said Dan North, chief economist at Euler Hermes North America.

"The collapse in oil prices and in the demands for pipe and metals pieces in the oil industry weighs on US manufacturing."

Construction spending

Separately, figures from the construction spending painted a similarly gloomy picture.

Construction spending slipped for the first time in a year and a half, according to the Commerce Department, falling 0.4% in November.

The drop is the biggest since June 2014.

Mr North called the slowdown "concerning" because of its importance to the US economic recovery.

"Because of the 18 months' positive growth and the warm weather in November, a slip concerns me a bit," he said.

Previous construction spending data from January 2005 to October 2015 was also revised by the government after a "processing error" was revealed.

The corrected data indicates construction spending over that period was not as strong as initially reported. October 2015 spending grew by just 0.3%.

Experts say the correction may cause analysts to revise down their construction spending estimates for 2016.

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