US manufacturing activity drops to 21-month low

Activity in the US manufacturing sector hit a 21-month low in March, according to preliminary data released on Friday.

IHS Markit's flash manufacturing purchasing managers' index fell to 52.5 from 53.0 in February, missing expectations for a reading of 53.6.

Softer business activity growth reflected more subdued demand conditions, with new work rising at the weakest pace since April 2017. A number of firms cited cautious spending patterns among clients and less upbeat business sentiment.

Meanwhile, the services PMI fell to 54.8 this month from 56.0 in February, versus expectations for an unchanged reading.

The composite index - which measures activity in both sectors - declined to 54.3 in March from 55.5 the month before, undershooting forecasts of 55.2.

Chris Williamson, chief business economist at IHS/Markit said: "A gap has opened up between the manufacturing and service sectors, however, with goods-producers and exporters struggling amid a deteriorating external environment and concerns regarding the impact of trade wars. The survey is consistent with the official measure of manufacturing production falling at an increased rate in March and hence acting as a drag on the economy in the first quarter.

"At the moment, the service sector appears to be holding up relatively well. But the worry is that manufacturing woes are spreading to service providers, via reduced demand for services such as transport and storage as well as deteriorating business optimism about the outlook - which fell to the lowest for nearly three years in March - and a cooling of the labour market. The survey showed hiring across both manufacturing and services hit the weakest for just under two years in March."