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The nation's factory sector contacted in December 2007 to its weakest level since April 2003, the Institute of Supply Management announced Wednesday. The ISM index fell to 47.8% in December 2007 from 50.8% in November 2007. Readings below 50% indicate a contracting industrial sector. Analysts had expected a December 2007 ISM reading of 50.9%.

In all, only seven of 18 industrial segments expanded. Moreover, economic activity in the manufacturing sector failed to grow in December 2007 after 10 consecutive months of expansion, while the overall economy grew for the 74th consecutive month, the ISM announced.

Disappointing statistic

Economist Steve Affinito told BloggingStocks Wednesday that the ISM statistic will place more pressure on the U.S. Federal Reserve to continue to cut short-term interest rates.

"It's a disappointing statistic, no question. We were looking for something slightly north of [above] 50% and a reading below 50%, that has to concern the Fed. It's just one month but it indicates that manufacturing is contracting, and at minimum is likely to grow to slowly," Affinito said. "The Fed will have to cut interest rates at least two more times to help prevent an economic stall. The December ISM stat is not a number the Fed hawks can ignore."

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Manufacturing contracts to weakest level since April 2003 originally appeared on BloggingStocks on Wed, 02 Jan 2008 12:44:00 EST. Please see our terms for use of feeds.

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