WASHINGTON - US manufacturing activity contracted in February more quickly than markets expected as demand slowed and output eased.
The manufacturing sector has been a casualty of the US Federal Reserve's battle against inflation through interest rate increases.
Higher rates act to slow demand by raising the cost of borrowing on everything from consumer mortgages to loans.
The Institute for Supply Management (ISM) said its manufacturing index stood at 47.8 percent last month, down from 49.1 percent a month earlier.
This was significantly below market expectations, according to Briefing.com, and kept the index below the 50-point marking separating expansion from contraction for the 16th month in a row.
"The US manufacturing sector continued to contract (and at a faster rate compared to January), with demand slowing, output easing and inputs remaining accommodative," ISM survey chief Timothy Fiore said in a statement.
This was reflected in the fact that the ISM's New Orders and Production indexes reversed course in February, reentering contraction territory.
"Factory activity remains under pressure but weakness in the sector has not spread more broadly to the economy," High Frequency Economics chief US economist Rubeela Farooqi wrote in a note to clients.
"The outlook is uncertain but there could be support for factory activity as borrowing costs move lower and credit conditions ease," she added.
Despite the gloomy manufacturing picture, the overall economy continued its expansion for a 46th consecutive month, according to ISM.
This is likely to be welcome news for President Joe Biden, who is looking to talk up the strength of the American economy ahead of presidential elections in November.
The ongoing manufacturing challenges stand in stark contrast to the services sector, which came in at 53.4 percent in a January ISM survey, marking the 13th straight month of expansion.