U.S. November Manufacturing Activity Contracts To 26-Year Low To 36.2

December 1, 2008 12:50 p.m. EST

New York, NY (AHN) - Manufacturing sector in the U.S. economy contracted in the month of November to 26-year low level on declining demand from the companies and slumping credit crunch, a report said on Monday.

The Institute for Supply Management (ISM) showed in its monthly report that manufacturing sectors in the U.S. have dropped more than forecast for the month of November.

The manufacturing index declined at the fastest pace since May 1982 to 36.2 percent last month, compared to 38.9 percent reported in the month of October, according to the key ISM report.

A reading of the index above 50 indicates that it is expanding, while a reading below 50 is a sign of overall business contraction.

The market analysts on Wall Street had expected the ISM manufacturing index to be at 37 in the month of October. The manufacturing sector represents a small part of the economy, but it is an important industry.

The report on the ISM index indicated that there are no signs of easing concern on the slow down of the world's largest economy and that it may continue to sink deeper into the quicksand of recession.

"When comparing November to October, the PMI indicates a continuing rapid rate of contraction in manufacturing," Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.

Ore added that new orders have contracted for 12 consecutive months. According to him, the November's new orders are at the lowest level since June 1980 when the index registered 24.2 percent.

"The Prices Index at 25.5 percent indicates that commodity prices continue to decline at a rapid rate. This is the lowest reading for the index since May 1949 when it registered 20.1 percent," Ore said.

The Tempe, Arizona-based group reported that new orders index dropped by 6.6 percent to 27.9 percent in November, compared to 32.2 percent registered in October.

The employment index declined to 34.2 in November, compared to 34.6 reported in October. The U.S. economy has shed 1.2 million jobs so far this year.

Some of the leading industries that failed to grow last month include nonmetallic mineral products, petroleum & coal Products; wood products; furniture & related products; computer & electronic, machinery, fabricated metal products and others.

In November, the two industries reported growth include apparel, leather and allied products; and paper products.