WASHINGTON – Manufacturing expanded at the slowest pace in more than three years, and construction spending declined as housing continued to suffer through its longest stretch of weakness since 1995.
Two reports released yesterday depicted an economy beginning to feel the impact of the sharp slump in the once-booming housing sector.
The Institute for Supply Management said its gauge of manufacturing activity fell to 51.2 in October. That compares with 52.9 in September and is the lowest since June 2003. A reading higher than 50 signals expansion. October's decline reflected weakness at companies that supply the beleaguered auto and housing industries.
Norbert J. Ore, chairman of the ISM's survey committee, said he wouldn't be surprised if the index fell below 50. It hasn't done that since April 2003. He said he doubted it would stay there “very long.”
The Commerce Department said spending on construction projects dropped by 0.3 percent to a seasonally adjusted annual rate of $1.196 trillion in September. Housing activity fell for a sixth straight month, the longest stretch of declines since 1995.
“It now seems clear that the U.S. factory sector is straining under the weight of declining auto production and a deteriorating housing market,” said Bart Melek, an economist at BMO Capital Markets.
Analysts said manufacturing, which had strong growth in recent years after the 2001 recession, probably would slow sharply in the coming months, reflecting the overall sluggish economy.
“The manufacturing malaise is gathering steam and the troubles in the vehicle sector point to further problems ahead,” said Joel Naroff, chief economist at Naroff Economic Advisers.
Analysts said the 1.1 percent drop in home building in September, the sixth consecutive decline of 1 percent or more, showed how quickly builders were scaling back production in the face of slumping demand.
“Housing is still a huge drag and will remain so for the foreseeable
