Manufacturing Shrinks First Time in 8 Months

U.S. manufacturing contracted in September for the first time in eight months, an industry survey showed Tuesday, the latest sign that the economic recovery is hobbling into the final quarter of 2002.

Business investment “is very weak right now and I just don’t see any signs of recovery,” said Jeffrey Immelt, chief executive of General Electric Co., during a trip to Seoul. “The U.S. economy is in a period of slow growth.”

The Institute for Supply Management’s factory index dropped to 49.5, reflecting a slowdown in production and declining employment, from 50.5 in August. The index had been greater than 50, signaling growth, since February.

Still, a survey Monday showing manufacturing in the Chicago area contracted for the first time in eight months had analysts bracing for a much more substantial decline, said Steven Ricchiuto, chief economist at ABN Amro Inc.

Meanwhile, construction spending fell in August for a fourth straight month, the longest string of declines since April to July 2000, the Commerce Department said Tuesday.

A decrease in business spending for new offices and factories pushed down the value of all construction spending by 0.4% in August, the Commerce Department said. The $159.2-billion value of construction of nonresidential buildings is the lowest in six years.

For its manufacturing report, the Tempe, Ariz.-based ISM group surveys more than 400 companies in 20 industries, including clothing, printing, transportation, furniture and plastics. Manufacturing accounts for about one-sixth of the economy.

The production index, a gauge of work being performed, fell to 50.9 in September from 55.6. The employment index declined to 44.9 from 45.8.

The index of inventories fell to 43.6 from 45.2, indicating inventories are being run down at a faster pace.

The new orders index, which accounts for about a third of the total, rose to 50.9 from 49.7 in August.

The backlog of orders index fell to 44.5 from 45. The new export orders index dropped to 51.8 from 52.7. The index of prices paid for supplies rose to 62.5 from 61.5.