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Manufacturing fell Original Source Link: (May no longer be active)
http://story.news.yahoo.com/news?tmpl=story2&cid=568&ncid=749&e=1&u=/nm/20021101/bs_nm/economy_manufacturing_dchttp://story.news.yahoo.com/news?tmpl=story2&cid=568&ncid=749&e=1&u=/nm/20021101/bs_nm/economy_manufacturing_dc
Manufacturing Contracts Once Again
1 hour, 10 minutes ago
By Ross Finley
NEW YORK (Reuters) - U.S. manufacturing contracted for a second straight month in October, a report said on Friday, stoking concerns the U.S. economy has stalled.
The latest in a series of weak reports on the economy, the data cemented bets in financial markets that the Fed will cut interest rates by at least a quarter percentage point next week.
"The factory sector is in a slump and given the nature of the numbers that have been published, it indicates the Fed is going to cut," said Asha Bangalore, economist at Northern Trust Co. in Chicago.
The Institute for Supply Management said its index of manufacturing business conditions fell in October to 48.5, its lowest since December 2001, from 49.5 in September.
That mostly matched forecasts for a fall to 48.9 but was under the 50 mark, denoting contraction in a sector that makes up less than one-fifth of the economy.
"The sector lacks drivers at this point," said Norbert Ore, director of ISM's survey, in a release, adding that business capital spending remains very soft and some executives are worried about the impact on business of a possible war on Iraq.
In another sign the economy is struggling, the unemployment rate in October rose to 5.7 percent and payrolls shrank by 5,000, with particularly heavy losses in manufacturing.
Financial markets mostly shrugged off the data, as they mostly met market expectations. Interest-rate futures were still pricing a quarter percentage point cut in the federal funds rate, currently at 1.75 percent, on Wednesday.
The ISM report followed government data earlier on Friday that showed the economy shed 5,000 jobs in October and the jobless rate rose, to 5.7 percent from 5.6 percent.
While the economy grew by a healthy 3.1 percent annual rate in the third quarter, momentum generated by robust consumer spending, particularly on cars and trucks, has since abated. Auto makers have already warned investors that October was a very sluggish month, despite zero-interest rate deals.
Measures of consumer confidence have been sliding for the past five months and that slide accelerated in October as fears of a war on Iraq, a weak job market and punishing losses in stock markets earlier in the month weighed on consumers' views of the economy.
With profit margins under siege, businesses have been slashing costs and eliminating jobs. So far they have been reluctant to ramp up their capital spending plans, with many companies cutting back their outlook for the fourth quarter.
A barometer of future production, the ISM new orders index rose in October to 50.9 from 50.2 in September. But the index is down sharply from a recent peak of 65.3 in March and signals further sluggishness may lie ahead.
Factories again shed workers from payrolls in October, extending a recent downward trend since mid-2000. The employment index was virtually unchanged, edging up to 45.0 from 44.9.
That coincided with government figures on factory employment released earlier on Friday. The October jobs report revealed 49,000 manufacturing jobs were lost during the month, an acceleration over the 39,000 shed in September.
Hours worked in manufacturing also fell sharply, suggesting industrial production will also be down during the month.
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