U.S. ISM manufacturing index drops to 26-year low

The record contraction in the U.S. manufacturing sector continues. Production at factories in the United States contracted in October at the fastest pace in 26 years, as companies reduced orders and the credit crisis began to ripple-through the manufacturing process.

Institute for Supply Management's Manufacturing Index for October fell to 38.9 -- its lowest level since September 1932 -- from 43.5 in September. The ISM Index totaled 49.9% in August. Economists surveyed by Bloomberg News had expected the index to drop to 41.5 in October. An ISM reading below 50 indicates a contraction; above 50, an expansion.

Economist Peter Dawson said one doesn't have to be a Harvard MBA to discern U.S. factory trends. "The U.S. manufacturing sector is in a deep recession, with nary a growth catalyst in sight," Dawson said. "Further, the stats are likely to worsen in the immediate quarter ahead, given the likely slowdown in international trade. Thank goodness the Boeing strike was settled, or who knows what these numbers would fall to in early 2009."

Further, Dawson said he favored a U.S. Government rescue of the U.S. automakers, "if for no other reason than preventing the manufacturing sector from cratering further." He added that he expects the new Congress and president to approve a auto sector rescue package.