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For those who were hoping for 4% growth in gross domestic product to continue late in 2018 and into 2019, the first economic release of 2019 might continue to temper expectations that had been seen in lower growth numbers of the prior few weeks. IHS Markit released its U.S. Manufacturing Purchasing Managers’ Index (PMI) for the month of December, and despite still being above “contraction” the data looks weak.

The PMI came in at 53.8 in December, down from 55.3 in November.

IHS Markit suggested that December’s gain was the weakest improvement in operating conditions going back to September of 2017, as the new order growth came in at a 15-month low. And even more data showed that overall business confidence was at the lowest point since October of 2016.

And on the jobs front, IHS Markit showed that the pace of job creation went down to an 18-month low despite another rise in backlogs. Firms surveyed reported an increase in overall workforce numbers after greater production requirements, but other businesses suggested that they were seeing low rates of employee retention and that it was weighing on their growth.

There is some good news, at least partially, on the inflation front as well. IHS Markit showed that greater cost burdens were seen due to raw material stockpiling among manufacturers, as well as shortages of electronics components and two-thirds of firms cited an ongoing impact of tariffs. Still, the rate of inflation was shown to be at an 11-month low, while factory gate prices increased by the weakest rate in all of 2018.

Business confidence among manufacturers fell again in December down to the lowest level since October 2016.

Production growth remained solid in December and at a rate that matched that seen in November. The rise in output was attributed to greater new order volumes. Some additional good news was seen in exporting activity by manufacturers. IHS Markit showed that new export business grew at an accelerated pace in December, with new orders coming from abroad having increased for the fifth straight month. That was shown to be the fastest rate since last January.

Chris Williamson, the chief business economist at IHS Markit, said of December’s report:

Manufacturers reported a weakened pace of expansion at the end of 2018, and grew less upbeat about prospects for 2019. Output and order books grew at the slowest rates for over a year and optimism about the outlook slumped to its gloomiest for over two years. The month rounds of a fourth quarter in which manufacturing production is indicated to have risen at only a modest annualized rate of about 1%.

Some of the weakness is due to capacity constraints, with producers again reporting widespread difficulties in finding suitable staff and sourcing sufficient quantities of inputs. However, the survey also revealed signs of slower demand growth from customers, as well as rising concerns over the impact of tariffs. Just over two thirds of manufacturers reporting higher costs attributed the rise in prices to tariffs.

The weakness in stocks already was present prior to the IHS Markit release on Wednesday morning. The markets can blame “weak economic readings from China” for that — as if that hasn’t been expected of late.

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