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Things often get worse before they get better, and that’s still the case for American factories.

Activity across the country’s manufacturing sector further deteriorated in August, just when economists predicted things would start to stabilize. The Institute for Supply Management’s manufacturing index unexpectedly fell to 47.2 in December from 48.1 in November. Economists polled by Bloomberg anticipated an increase to 49.

The reading reflects the weakest level of manufacturing activity since June 2009 and it’s the fifth straight month of contraction in the sector. (Prints below 50 represent contraction while readings above that level denote expansion.)

Global markets were already tumbling after news Thursday night that the U.S. assassinated a top Iranian general. Friday’s ISM report didn’t help. The S&P 500 was down 18 points to 3,239 while the Dow Jones Industrial Average was off 200 points to 28,668 in early afternoon trading.

The bones of the latest ISM survey paint a dismal picture. Demand continued to drop, with factories reporting the lowest level of new orders in more than a decade. That’s hitting manufacturing jobs, which have been dropping for five consecutive months. Manufacturing employment, according to the ISM, is at the lowest since the start of 2016.

“This is a seriously weak report, and we see little chance of a sustained near-term recovery,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. Shepherdson notes that the “phase one” trade deal with China leaves 25% tariffs on imported Chinese capital and intermediate goods in place, and he sees little chance of a comprehensive trade deal to remove them before November’s election.

Economists say the manufacturing sector appears still to be in a mild recession. “The salient question remains as to whether a manufacturing recession will lead to a full blown contraction in 2020 or not,” said Jon Hill, vice president of rates strategy at BMO Capital Markets.

There have been some special factors weighing on the sector. One was the strike at General Motors, which affected production at the end of 2019 and is now over. Another is Boeing, but that one isn’t going away soon.

The commercial aerospace giant said in Dec. 2019 that it would temporarily halt production of its 737 MAX jet, worsening turmoil already caused by Boeing’s newest single-aisle plane. The suspension of production will ripple through the aerospace industry, affecting parts suppliers as well as airlines.

The problems with Boeing’s 737 MAX is a real concern, ISM chair Tim Fiore said Friday. Fiore predicts the ongoing issues will drag on the sector for the next four to six months.

Meanwhile, trade concerns remain a dark cloud. “Starting to see suppliers try to pass on costs associated with tariffs,” one respondent told the ISM in December. That sentiment showed up in the surveys prices paid index, which was the highest in a year.

The ISM’s Fiore said there’s reason to believe the conditions will improve in the coming months. There are signs some industry sectors will improve as a result of the “phase one” trade agreement, he said, such as chemical manufacturers. And overall, manufacturers expressed that they were in a better position at the end of December than they were in November, he said.

Even so, investors shouldn’t expect any dramatic reversal of factory fortunes soon.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com