updated 3/2/2009 11:20:25 AM ET 2009-03-02T16:20:25

A private measure of the nation's manufacturing sector contracted for the 13th straight month in February, but at a slower pace than expected. Construction spending also shrank.

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The reading suggested to some economists that the decline of the ailing factory sector could be bottoming out, though they expect a recovery is still far in the future.

The Institute for Supply Management, a trade group of purchasing executives, said Monday its manufacturing index actually rose to 35.8 from 35.6 in January. Analysts had expected a drop to 33.8, and a reading below 50 indicates the sector is shrinking.

The index, which is based on a survey of members of the Tempe, Ariz.-based group, has fallen steadily since August as the economy has deteriorated, hitting a 28-year low of 32.9 in December.

"Survey respondents appear generally pessimistic about recovery in 2009," said Norbert Ore, chairman of the group's survey committee. "Some express hope that the stimulus package will help their industry."

The new report showed manufacturers cutting jobs at a rapid pace while new orders fell. The employment index fell to 26.1 in February, a new record low, from 29.9 the previous month. New orders dipped to 33.1 from 33.2.

The production index increased for the second straight month, to 36.3, from 32.1 in January.

None of the 18 industries covered by the survey — including wood products, primary metals, electrical equipment, transportation equipment and machinery — reported growth.

"While the index continues to show the manufacturing sector to be in a steep decline, the steady readings of the last two months suggest the decline is not accelerating," David Resler, chief economist at Nomura Securities International, wrote in a note to clients.

Separately, the Commerce Department said Monday that construction spending dropped 3.3 percent in January, the fourth straight monthly decline. Wall Street economists surveyed by Thomson Reuters expected a 1.5 percent drop. Residential construction fell 2.9 percent and nonresidential activity dropped 4.3 percent, the biggest decline since January 1994.

The department also said that consumer spending rose in January after falling for a record six straight months, pushed higher by purchases of food and other nondurable items. Consumer spending rose 0.6 percent, even better than the 0.4 percent gain that economists expected, though the rebound was viewed mostly as a blip and not a sign of extended recovery.

President Barack Obama last month signed into law a $787 billion stimulus package in spending and tax cuts, but U.S. manufacturers are getting hammered by a global recession that is sharply cutting demand for domestic products and sinking American exports.

General Motors Corp. last week reported an annual loss of $30.9 billion. The Detroit automaker, which shed 10,000 jobs in February alone, has said it may need up to $30 billion from the government to keep it afloat.

Thousands more job cuts were announced last month by a variety of manufacturers, including Goodyear Tire & Rubber Co., welding products manufacturer Lincoln Electric Holdings Inc., flash memory maker Spansion Inc. and makeup company Estee Lauder Cos.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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