Manufacturing Activity Shrinks for Second Straight Month

U.S. manufacturing activity contracted in October for the second straight month, the Institute for Supply Management reported Friday, the latest indication the economic rebound is running into difficulty.

The Tempe, Ariz.-based industry group said its index of business activity declined to 48.5 in October compared with 49.5 in September. Analysts had been expecting a reading of 48.9.

An index above 50 signifies growth in manufacturing, while a figure below that shows contraction.

The rate of manufacturing growth had been slipping since June before shrinking in September for the first time in seven months.

"Manufacturing activity declined again in October," said Norbert Ore, who oversees the monthly survey for the group, formerly known as the National Association of Purchasing Management. "The sector lacks drivers at this point. While new orders are relatively unchanged, the uncertainty with regard to terrorism and potential military action continue to add to the stagnation."

The survey found that purchasing supply executives were also concerned about the dock shutdown on the West Coast.

"There's no visibility and not a lot of willingness to spend money or to hire people," said John Silvia, chief economist at Wachovia Securities.

Still, there were some positives. Of the 20 industries in the manufacturing sector, seven reported growth, including apparel, textiles and food. The ISM's New Orders Index advanced from 50.2 percent in September to 50.9 percent in October.

The ISM report is tracked by economists because it offers an early reading on the health of the manufacturing sector. Its index is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 companies.