NEW YORK • A measure of US manufacturing activity unexpectedly fell last month to its lowest level since October 2016, in a sign that US President Donald Trump's trade war with China is weighing on the economy.
The Institute for Supply Management's (ISM) Purchasing Managers' Index (PMI) declined to 52.1 from 52.8, missing the median forecast of 53 in Bloomberg's survey but holding above the 50 mark that indicates expansion.
Three of five components declined, including production, inventories and supplier deliveries, according to a report yesterday. Eleven of 18 manufacturing industries reported growth.
The ISM index's lowest reading of Mr Trump's presidency - down from a 14-year high last August - follows other economic data suggesting that the sector was on shakier ground even before the latest escalation of tariffs between the United States and China began to pinch margins.
A separate factory PMI released yesterday by IHS Markit also fell, dropping to its weakest level since 2009.
Producers, who already faced headwinds from slowing global growth and inflated inventories, could face additional fallout after Mr Trump's threat last week to impose tariffs on all imports from Mexico. Sustained weakness would dent economic growth and could be a factor that prompts the Federal Reserve to cut interest rates, as investors and some economists expect.
ISM's production gauge dropped to 51.3 in May, its lowest level since August 2016, even as the gauge of backlogs declined to a two-year low. At the same time, the measure for new orders increased, as did the employment gauge. The measure of exports increased, rising back above 50, while the imports gauge decreased for a third month to a two-year low of 49.4.