Manufacturing activity fell more than expected in December, hitting the lowest reading in 28 years as new orders and employment continue to decline.
The Institute for Supply Management, a trade group of purchasing executives, said Friday its manufacturing index fell to 32.4 in December from 36.2 in November. Wall Street economists surveyed by Thomson Reuters had expected the reading to fall to 35.5.
Component readings of the index hit historic lows. New orders fell to their lowest level on records going back to 1948. Prices fell as the number of respondents saying they had paid more in December than in November sank to its lowest monthly reading since 1949.
Any reading for the overall index above 50 signals growth, while a reading below 50 indicates contraction. The index is based on based on a survey of the institute's members, has fallen steadily for the last five months as the economy deteriorated.
The index fell to its lowest level since June 1980, when the economy was near the end of a six-month recession.
Investors shrugged off the grim report on the new year's first day of trading, eager to start fresh after the losses of 2008. Stocks were higher in late-morning trading, with the Dow Jones industrial average up 98.05, at 8,874.44. Broader indexes were also higher.
Only three recessions in the history of the index have showed weaker manufacturing readings, said John Ryding, of RDQ Economics. Those recessions were in 1948 to 1949, 1973 to 1975 and 1980.
With European manufacturing indexes also dropping, "the case for a massive global fiscal stimulus continues to grow," Ryding said.
As the economy sputters through a recession that began in December 2007, no industry is proving resistant. No sector reported overall growth in December. Also, none reported growth in new orders, production, employment or prices, as businesses from tobacco to coal products to foodmakers saw declines.
The employment index showed its lowest reading since 1982. The sector lost 85,000 jobs between October and November, according to the most recent data from the Bureau of Labor Statistics. More losses are expected in coming months as demand continues to be weak.
The chemical industry, for instance, has been battered by both the decline in demand and volatile commodity prices. LyondellBasell Industries, the third-largest independent chemical company in the world, said Wednesday that while several lenders had allowed it to postpone $160 million in loan payments, a Chapter 11 bankruptcy filing might still be an option.
The announcement came just two days after the collapse of a $17.4 billion joint venture between Dow Chemical and Kuwait's Petrochemical Industries Co.