US factory sector shrinks to 14-month record low

US manufacturing activity slumped to a 14-month low in December, with new orders contracting further and input costs grinding higher as the sector continued to bear the imprint of President Donald Trump's import tariffs.

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The Institute for Supply Management survey on Monday suggested a recovery was unlikely in the near-term, but economists were hopeful of a turnaround this year as Trump's tax cuts took effect.

Comments from survey respondents continued to single out tariffs as a problem, with some manufacturers of chemical products saying they hoped “for some return to free trade, which is what consumers have ‘voted for’ with their spending.”

Trump has said the tariffs are bringing in hundreds of billions of dollars in new revenue to the US Treasury and that they are improving US economic security.

But beyond the sectors lifted by an Artificial Intelligence investment boom, Trump's sweeping import duties have undercut manufacturing, even as he touts them as necessary to shore up a long-declining domestic factory base.

Economists have argued it is impossible to restore the industry to its former glory because of structural issues, including worker shortages.

“While a less fluid trade environment and somewhat more favorable business tax environment are positives for activity, we remain cautious on the extent of recovery in traditional cap-ex categories this year,” said Shannon Grein, an economist at Wells Fargo.