THE BASIS POINT

ISM: Factory Activity Contracts At Fastest Pace Since October 2001

The Institute for Supply Management reported its factory index dropped to 43.5 for September, showing that the housing slump is now spreading to the manufacturing sector. According to the index, 50 is the dividing line between expansion and contraction. The September reading was the lowest level since October 2001, the period immediately following the 9/11 attacks. Below are some additional figures from a Bloomberg report:

The Commerce Department also reported that construction spending stalled in August after a revised 1.4 percent drop the previous month that was more than twice as large as previously estimated. Private residential building increased for the first time since March 2007 and work on commercial projects fell for a fourth month.

Orders from overseas have weakened as economies abroad falter. ISM’s export gauge fell to 52 from 57 the prior month.

The purchasing managers’ gauge of new orders for factories decreased to 38.8, also the lowest since 2001, from 48.3 the prior month. The production measure dropped to 40.8 from 52.1.

Companies are cutting back on investments and hiring as consumer spending wanes. A deteriorating labor market also is causing Americans to limit purchases to necessities such as food and fuel.

Chrysler LLC, the third-largest U.S. automaker, said last week that it planned to fire about 250 workers as part of a plan to cut 1,000 salaried positions by Sept. 30. The Auburn Hills, Michigan-based company’s U.S. sales dropped 24 percent through August, more than twice the industry’s 11 percent decline.