US manufacturing sector shrinks for 4th consecutive month

The US manufacturing sector has contracted for the fourth consecutive month in November according to an Institute for Supply Management report.

The Institute for Supply Management reported that its purchasing managers' index for the US manufacturing sector was only at 48.1, compared to the economists' consensus forecast of 49.2. Anything under 50 is considered a contraction for the sector.

This was despite many economists expecting a fourth quarter stabilization. Sal Guatieri, senior economist at BMO, said: "A bounce was expected after the end of the GM strike and amid some easing in U.S./China trade tensions."

The worse-than-expected results also follows improved manufacturing numbers from China and Europe, which led people to believe that the sector might be experiencing a global stabilization.

Timothy Fiore, chair of the Institute for Supply Management's Manufacturing Business Survey Committee, argued: "Global trade remains the most significant cross-industry issue."

According to survey respondents, the contraction in the sector may be due to ongoing economic uncertainty and confusion over the trade relationship with China while others said that the current conditions led them to revise their capital-spending plans.

Furthermore, construction spending in the month of October also dramatically fell below expectations as it experienced a 0.8% decline when forecasts indicated a 0.4% increase.

To make matters worse for manufacturers, US President Donald Trump threatened again to impose import tariffs on steel and aluminum from Brazil and Argentina, citing a "massive devaluation of their currencies."  Both the Brazilian real and the Argentine peso have fallen in value against the US dollar this year.

These developments impacted US stocks on Monday, which posted their worst one-day percentage drops in weeks. The S&P 500 Index went down by 0.9% while the Dow Jones Industrial Average closed at 268 points, marking an almost 1% decline.

Meanwhile, the NASDAQ Composite decreased by 1.1%. All three indexes posted their worst one-day percentage declines since early October.