Australian shares plunged on Friday as weak US manufacturing data sparked worries of a decline in demand.

The S&P/ASX 200 Index plummeted 171.50 points, or 2.1%, to7,943.20.

A measure of US manufacturing activity, the Institute of Supply Management Manufacturing Purchasing Managers Index dropped to an eight-month low of 46.8 in July. This was below economists' expectations of 48.8.

On the domestic front, the value of new housing loans in Australia rose 1.3% to AU$29.19 billion in June. Owner-occupier loans ticked up 0.5% to AU$18.17 billion, while new investor loans climbed 2.7% to AU$11.02 billion.

Final demand, excluding exports, in Australia rose 1.0% in the second quarter from Q1. Construction output prices continued to be impacted by rising labor costs and skilled trade shortages, while services output prices were impacted by higher fees linked to increased rent.

Australia's seasonally adjusted household spending dropped 0.5% in June, following a 1% increase in May.

In company news, ResMed (ASX:RMD) reported Friday that its earnings per share in the three months ended June 30 rose to $1.98, compared with the prior-year period's $1.56. Shares of the medical equipment company closed 2% lower Friday.

Block (ASX:SQ2), formerly known as Square, reported an attributable net income of $195.3 million for the three months ended June 30, compared with a loss of $102 million for the year-ago period. The fintech company's shares jumped 5%.