The U.S. manufacturing sector's economic activity expanded at its slowest monthly pace in two years in December 2018, as growth in new orders and production sharply weakened, according to the latest survey data from the Institute for Supply Management.
ISM's closely watched manufacturing purchasing managers' index fell to 54.1% last month from 59.3% in November 2018, dropping to its lowest level since November 2016, when the index came in at 53.4%. A reading above 50% indicates overall expansion.
The new orders index tumbled by 11 percentage points to 51.1%, the weakest rate since August 2016. The production index fell by 6.3 percentage points to 54.3%, also the lowest level since October 2016.
The measure of imports expanded at its lowest rate since May 2017, while the export orders index inched up from the previous month, according to ISM. The employment, supplier delivery and inventory indexes also registered lower readings in December.
ING Economics noted that the decline in the headline ISM index, which is the steepest since 2008, is a "concerning development" and signals fears of trade protectionism.
"The plunge in the ISM manufacturing index adds to the sense of unease about the prospects for the global economy and will reinforce financial market gloom," James Knightley, chief international economist at ING Economics, wrote in a research note.
Knightley added that the latest survey data offers further evidence suggesting that the Federal Reserve's pace of interest rate hikes will be "much more modest" in 2019 compared to last year.
A separate survey published by IHS Markit that also gauges the manufacturing sector's health showed the weakest pace of expansion in 15 months in December amid slower growth in output and new orders.