Manufacturing sector contracted in September

October 1, 2008 7:58:38 AM PDT
measure of U.S. manufacturing activity contracted more than expected in September, as new orders slowed dramatically. The reading of 43.5 from the Institute for Supply Management was down from August's 49.9. It also was worse than economists' prediction of 49.5, according to the consensus estimate of Wall Street economists surveyed by Thomson/IFR.

A reading above 50 signals growth.

"The headline ISM has plunged into recession territory," Ian Shepherdson, chief U.S. economist at High Frequency Economics, said Wednesday.

The index has been hovering on what economists call "the boom-bust" line for most of the year, but this is the first time it has dropped significantly. One component of the reading, the purchasing managers' index, fell to its lowest level since October 2001, immediately after the Sept. 11 attacks.

The survey of purchasing managers found new orders fell to 38.8 in September from a reading of 48.3 in August. Employment, deliveries, inventories and manufacturers' order backlogs also fell.

Industries reporting contraction include apparel, furniture, machinery, transportation equipment and electrical appliances.

High prices for commodities, along with tight credit conditions, have begun to squeeze companies. Pilgrim's Pride Corp., the nation's largest chicken producer, said Monday it expects to report a "significant" fiscal fourth-quarter loss.


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