US manufacturing plunges deeper into recession

New York(CNN Business) America's manufacturing downturn isn't letting up. Factory activity contracted for the fifth consecutive month in December, registering a worse drop than expected.

The Institute of Supply Management's manufacturing purchasing managers' index logged its lowest level since June 2009 at 47.2, compared with the consensus forecast of 49. It stood at 48.1 in November. Any number below 50 denotes a contraction.

Uncertainties surrounding the US-China trade war weighed on the sector last year. And while Washington and Beijing stand to sign a preliminary trade deal on January 15, economic data from December was still deflated because of the spat.

"Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the 'phase one' trade agreement between the US and China," said Timothy Fiore, chair of the ISM manufacturing business survey committee.

Last week, the Federal Reserve argued in a paper that import tariffs hurt US manufacturing. "A positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs," it said.

Even though the US economy is driven primarily by consumer spending, the on-going manufacturing slump is affecting GDP forecasts for the final quarter of 2019.

The New York Fed lowered its fourth quarter growth expectations to 1.1% from 1.2% following the ISM data. The Atlanta Fed still forecasts 2.3% growth between October and December.

While America's factories still struggled at the end of 2019, the sector is showing early signs of improvement globally. The JPMorgan (JPM) global manufacturing PMI stood at 50.1 in December, slightly below the prior month's number but still proving that the industry is expanding.

-- Katie Lobosco contributed to this report.