Manufacturers, already hit by mounting job losses, saw business plummet to the lowest level in 26 years in October. Shrinking construction spending, meanwhile, provided more evidence that the U.S. had entered a recession that may be deep and prolonged.
The Institute for Supply Management said Monday that its manufacturing index fell to 38.9, the lowest reading since September 1982, when the country was near the end of a 16-month recession. Any reading below 50 signals contraction.
“Everything we can tell about the economy just got weaker,” said Stuart G. Hoffman, senior vice president and economist for PNC Financial Services Group. The manufacturing report confirmed the economy was falling deeper into recession, Hoffman said.
The manufacturing index had been hovering near what economists call “the boom-bust” line for most of the year until its sharp decline in September brought it to the lowest level since the aftermath of the Sept. 11, 2001, terrorist attacks.
October’s reading of 38.9 was sharply below the September figure of 43.5 and lower than economists’ expectations of 41.5, according to the consensus estimate of Wall Street economists surveyed by Thomson Reuters.
Manufacturers, already hurting from declines in construction and consumer spending, were further battered by the credit crisis and Gulf Coast hurricanes.
Martin Marietta Materials Inc., which supplies granite, limestone, sand and gravel to builders, last week slashed its 2008 earnings guidance, saying it expected to earn $4.25 to $4.65 a share, down from the company’s August guidance of $5 to $5.65 a share.
“Over the past 45 to 60 days, the lack of available business credit has stalled construction activity and further affected demand for our products,” the company said. “Construction projects underway have had credit effectively pulled, and new projects are subject to increasingly tighter lending standards.”
Steel maker ArcelorMittal this week idled its Cleveland plant, which has 1,450 union employees, as demand declined. Mobile phone maker Motorola Inc. last week reported a third-quarter loss and said it would cut 3,000 jobs by April. And General Motors Corp. last week said it was extending the deadline for white-collar workers to accept early-retirement packages, saying layoffs were probable.
In another report, the Commerce Department said Monday that construction spending declined 0.3% in September, the third drop in the last four months.
The decline was less than the 0.8% drop economists had expected. But it left total building activity at an annual rate of $1.06 trillion in September, down 6.6% from the 2007 level.