The U.S. manufacturing sector continued to contract in December, with the ISM manufacturing index falling to 47.9%, the lowest reading of the year and marking the 10th straight month below 50%.

Economists had expected a slight improvement, but weak demand and uncertainty from tariffs kept activity low.

New orders declined for the fourth consecutive month, production slipped slightly, and only two of 19 industries reported growth, while employment remained below 50% at 44.9.

Analysts say the sector needs a sustained increase in new orders over several months to rebound, with backlogs then driving production growth, MarketWatch has reported.

While some economists see tax incentives boosting future manufacturing activity, others warn the sector remains “sick” and slow to respond to current economic policies.