U.S. manufacturing on the decline
NEW YORK (AP) - January 2, 2008 The figures are closely watched because a slowdown in factory
production can translate to job cuts, which in turn reduces
consumer spending - a major component of the economy.
The Institute for Supply Management, a Tempe, Ariz.-based
private research group, said its manufacturing index registered
47.7 last month, down 3.1 percentage points from the 50.8 recorded
in November. A reading above 50 indicates growth; below that spells
contraction.
The December results were weaker than the 50.9 expected by
analysts polled by Thomson/IFR Markets. Last month was the first
that manufacturing has failed to grow since January 2007, when the
index was 49.3. It has been four years and eight months since the
index was lower than in December; it hit 46.4 in April 2003.
The results sent stocks falling in morning trading as investors
worried that the slowdown in manufacturing would spread to the
overall economy. The Dow Jones industrials fell more than 100
points by midmorning.
Meanwhile, the Commerce Department reported Wednesday that
construction spending edged up slightly in November as the
continued housing slump was offset by record spending on government
and business projects. Spending was up 0.1 percent in November to a
seasonally adjusted annual rate of $1.165 trillion. Spending had
fallen by 0.4 percent in October.
Many economists believe the U.S. economy grew at an anemic rate
of about 1.5 percent in the final quarter of the year and that it
could slow to 0.5 percent or less in this first three months this
year. A growing number expect a recession because of turmoil in the
housing market and continuing tight credit conditions.
The chairman of ISM's manufacturing business survey committee,
Norbert Ore, said supply executives reported that slower demand was
more of a problem than excess inventory. The survey found weakness
in new orders and production, which reversed in December after
reporting growth in November.
"The recent trend has been toward slower growth," Ore said in
a statement. "However, December was apparently a very tough
month."