Business at America's manufacturers from plastic companies to lumberyards plummeted to the lowest level in 26 years in October, in what many economists called a sure sign of recession.
The Institute for Supply Management said Monday its manufacturing index fell to 38.9, the lowest reading since September 1982 when the U.S. was in a deep recession. Any reading below 50 signals contraction.
"It's a report that confirms everything we learned in the last couple months — the economy is falling deeper into recession," said Stuart G. Hoffman, senior vice president and economist for The PNC Financial Services Group.
The index had been hovering near what economists call "the boom-bust" line for most of the year until its sharp fall in September brought it to the lowest level since the aftermath of the Sept. 11 attacks.
Monday's reading was dramatically below this past September's reading of 43.5 and far lower than economists' expectations of 41.5, according to the consensus estimate of Wall Street economists surveyed by Thomson Reuters.
The credit crisis and Hurricane Ike in September battered a manufacturing industry already hurting because of declines in construction and consumer spending.
Martin Marietta Materials Inc., which supplies granite, limestone, sand and gravel to builders, last week slashed its 2008 earnings guidance, saying it expects to earn between $4.25 and $4.65 per share, down from August guidance of $5 to $5.65 per 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 under way have had credit effectively pulled, and new projects are subject to increasingly tighter lending standards."
Meanwhile, the overall unemployment rate was 6.1 percent in September for the second straight month, the highest it's been in five years. Manufacturing workers have been hit especially hard.
Steelmaker 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.
Elsewhere, auto parts supplier ArvinMeritor Inc. said Friday it will cut 1,250 jobs, about 7 percent of its worldwide staff. And General Motors Corp. last week said it was extending the deadline for white-collar workers to accept early retirement packages, saying involuntary layoffs are probable.
Ford Motor Co. on Monday said its October sales dropped 30 percent and other automakers are expected to report monthly sales later in the day. Analysts say overall sales could be the worst in more than 25 years.
Monday's manufacturing report is the latest in a string of grim economic indicators.
The nation's gross domestic product for the third quarter, released Thursday, showed the economy shrank at a 0.3 percent annual rate in the July-September quarter, as consumer spending saw the greatest decline in 28 years.
The Commerce Department's report on construction spending Monday showed a 0.3 percent decline in September, the third drop in the past four months.
While the construction decline was better than the 0.8 percent drop economists expected, it left total building activity at an annual rate of $1.06 trillion in September, down 6.6 percent from the year-ago level.
Stocks inched higher in the first trading day of November. After a 14 percent decline in October, some investors feel stocks are cheap.
The Dow Jones industrial average was up 51 points to the 9,376 level in early afternoon trading.