Factory growth hits 2-year low amid trade woes

WASHINGTON — American factories grew last month at the slowest pace in more than two years, with some manufacturers complaining about the impact of President Donald Trump’s contentious trade policies.

The Institute for Supply Management, an association of purchasing managers, said Thursday that its manufacturing index dropped to 54.1 in December, down from 59.3 in November and the lowest level since November 2016. Anything above 50 signals growth, and American manufacturing has been on a 28-month winning streak.

Still, the December drop — the biggest in a decade — was worse than economists had expected.

New orders, production and factory hiring all grew at a slower pace last month. Eleven of 18 manufacturing industries reported growth in December, led by textile mills and apparel makers.

Several respondents cited higher costs and uncertainty arising from Trump’s import taxes on steel, aluminum and hundreds of Chinese products. At the same time, the Chinese economy — the world’s second-biggest — is decelerating.

“This is grim,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, adding that “the story here is that the trade war, coupled with China’s underlying slowdown, is wreaking havoc in both countries.”

Overall, the U.S. economy looks healthy. At 3.7 percent, the unemployment rate is near a 50-year low. Growth clocked in at a brisk annual pace of 3.4 percent from July through September.

But the stock market has been tumbling since early October on fears that the U.S. economic expansion — the second-longest in history — could sputter this year or next.

The U.S. is set to resume trade talks with China this month.

TONY DEJAK/AP New orders, production and factory hiring all saw their biggest drop in a decade last month.