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Manufacturing activity at 26-year low

 

NEW YORK (CNNMoney.com) -- A key index of the nation's manufacturing activity fell to a 26-year low, sliding into recession territory, a purchasing managers group said Monday.

 

The Institute for Supply Management's (ISM) manufacturing index tumbled to 38.9 in October from 43.5 in September. It was the lowest reading since September 1982, when the index registered 38.8.

 

Economists were expecting a reading of 42, according to a survey conducted by Briefing.com.

 

The tipping point for the index is 50, with a reading below that indicating contraction in manufacturing activity. The index has hovered around the 50 mark since September 2007, with an average of 49.1.

 

A reading below 41 is considered a sign that the economy is in recession.

 

"It appears that manufacturing is experiencing significant demand destruction as a result of recent events, with members indicating challenges associated with the financial crisis, interruptions from the Gulf hurricane, and the lagging impact from higher oil prices," said Norbert Ore, chairman of the Institute for Supply Management's Manufacturing Business Survey Committee, in a statement.

 

Employment in the manufacturing sector fell for the third month in a row. ISM's employment measure registered 34.6 in October, down 7.2 points from September. It was the lowest reading for the employment component since March 1991, when it registered 33.6.

 

The index component for the prices manufacturers pay for raw materials declined 16.5 points to a reading of 37 in the month. It was the lowest point for the component since December 2001 when the prices index registered 33.2.

 

In a sign of growing economic weakness worldwide, the index's measure of export orders fell 11 points to a reading of 41. The decline came after 70 months of expansion.

 

Rising exports had been a bright spot for U.S. manufacturers as the domestic economy deteriorates. But last month's decline suggests that struggling consumers overseas are losing their appetite for U.S. exports.

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