NEW YORK U.S. manufacturing activity declined in February to its weakest level in nearly five years, an industry group survey showed Monday, heralding more instability in the job market and further frailty in the overall economy.
After reporting modest growth for January, the Institute for Supply Management said its February manufacturing index registered at 48.3 its weakest reading since April 2003, but above Wall Street's even poorer expectations.
A reading above 50 indicates expansion, and anything below that shows contraction. The February figure was a bit better than the median forecast of 48.1 of economists polled by Thomson Financial/IFR. But it was slightly worse than December's reading of 48.4.
Manufacturers have been struggling with the rising cost of raw materials and languid demand in the housing market. Industries reporting declining activity last month included furniture, textiles, machinery and chemical products; those reporting growth included apparel, leather, wood, plastics and rubber, and food and beverage.
It's too soon to say that recent economic data proves that the nation's economy is headed for, or already in, a recession. Recession is normally defined by two straight quarters of declines in gross domestic output.
But more economists are starting to predict a recession, and Monday's manufacturing data appear to support that forecast.
The report's employment index fell to 46.0 from 47.1 in January, indicating accelerating contraction an inauspicious piece of news ahead of Friday's employment report for February from the Labor Department. On average, economists are forecasting a slight increase in payrolls, but many believe they will decline for a second straight month. January's net jobs loss was the first in almost four years.
Other worrisome categories were new orders, which also showed an accelerated contraction, and prices, which continued to increase, albeit at a slower pace than in January.