The U.S. manufacturing sector continued to expand in December, albeit at a slower pace than earlier in the year, according to data released Wednesday.

“The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index posted 53.8 in December, down from 55.3 in November,” IHS Markit said.

Readings above 50 indicate expansion in the purchasing managers index. The reported figure was slightly below the 53.9 economists surveyed by Bloomberg expected.

“Notably, business confidence among manufacturers fell again in December, with the degree of optimism dipping to the lowest since October 2016,” IHM Markit said.

IHS Markit pointed out that the final quarterly average of 2018 was strong and better than that seen in 2017.

“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,” Chris Williamson, Chief Business Economist at IHS Markit, said.