updated 4/2/2007 10:57:03 AM ET 2007-04-02T14:57:03

The nation’s manufacturing sector expanded at a slower-than-expected pace in March but still extended its growth spurt into a second month, a trade group said Monday.

Major Market Indices

The Institute for Supply Management said its manufacturing index registered 50.9 in March, below the February reading of 52.3 and Wall Street’s expectation of 51.

A reading above 50 indicates growth for the sector, while a reading below 50 indicates contraction.

The ISM’s manufacturing sector index has wavered above and below 50 for several months, an indication of the overall economy’s uncertain path. It showed contraction in November, rebounded in December, fell back again in January, only to expand again in February.

Stocks fell in response to the report, as investors showed their ongoing nervousness about the overall economy’s health.

The ISM survey, compiled from questions sent to corporate purchasing managers, found that companies had more orders for new business and that their production expanded in March, while employment and manufacturers’ inventory levels declined.

After five consecutive months of growth, the customers’ inventories index fell to 48, indicating manufacturers’ inventories are nearing satisfactory levels, said Norbert Ore, chair of the survey committee for Tempe, Ariz.-based ISM. That raised hopes for an increase in orders in the months ahead.

However, prices appeared to be surging for certain commodities, Ore said.

Among the top performing industries reporting growth in March were apparel; leather and allied products; miscellaneous manufacturing; wood products; transportation equipment; plastics and rubber products and food, beverage and tobacco products.

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