WASHINGTON (AP) — Factory activity in the U.S. shrank in August for the first time since August 2016, a sign that the trade war with China is weighing down a crucial sector of the economy.

The Institute for Supply Management, an association of purchasing managers, says that its manufacturing index slid to 49.1 last month, from 51.2 in July. Any reading below 50 signals a contraction.

A global softening in demand, worsened by an increasingly high-risk war between the U.S. and China, appears to be hurting American manufacturers. More than half of the public comments from companies surveyed by ISM pointed to economic uncertainty as a drag on their businesses.

Production declined by 1.3 percentage points, while employment fell by 4.3 points. New orders fell by 3.6 points.