U.S. manufacturing barely expanded last month, in part because cold weather delayed shipments of raw materials and caused some factories to shut down.
The report from the Institute for Supply Management, a trade group of purchasing managers, contributed to a plunge on Wall Street. The manufacturing report raised the possibility that the U.S. economy might be starting to weaken.
The Dow Jones industrial average tumbled 326 points - more than 2 percent. The Dow has sunk 7 percent so far in 2014.
U.S. construction spending rose modestly in December, slowing from healthy gains a month earlier.
The Commerce Department said Monday that construction spending increased a scant 0.1 percent to a seasonally adjusted annual rate of $930.5 billion, down from a revised 0.8 percent increase in November.
The December increase was driven by a 2.6 percent rise in private residential construction, which hit an annual pace of $352.6 billion, highest since June 2008. Spending on single-family homes rose 3.4 percent in December and 21.6 percent from a year earlier.