<<NEW YORK, Oct 1 (Reuters) - Manufacturing activity shrank for the fourth straight month in September, even as General Motors Corp. ramped up production after last summer's strike, a report by the nation's purchasing managers showed Thursday. The recent decline in manufacturing, spurred largely by a drop in exports to Asia and other regions hit by economic turmoil, comes after 22 consecutive months of growth.
The National Association of Purchasing Management said its Purchasing Managers' Index was unchanged at 49.4 percent last month. A reading above 50 percent indicates growth in manufacturing, which accounts for about a quarter of U.S. economic activity, while one below that signals contraction. The index has pointed to steady, gradual weakening in manufacturing since June, when it fell below 50 percent, and nothing in Thursday's report indicated a pickup anytime soon, or a sharpening decline, economists said.
''We've had four straight months now of right around 49 in this thing,'' said Carol Stone, deputy chief economist at Nomura Securities International Inc. ''That's a slight slowing of manufacturing activity. Right at the moment what it says is we're dead in the water.''
The report's production component managed to rise to 53.4 last month from 50.3 in August, thanks mainly to GM restarting its production. ''You did get the auto bounce, but it wasn't enough to lift the overall index,'' said Cary Leahey, chief U.S. economist at High Frequency Economics.
Measures of inventories, employment, export orders and prices all suggested a slowdown in manufacturing. The group said its price index was especially weak, falling to 34.4, the lowest since July 1949, from 38.4 in August. ''Product prices will continue to be under pressure and the manufacturing sector is going to be under water for quite a while,'' Leahey said.
Looking ahead, economists found little hope for a quick turnaround, and noted the dollar's continued strength actually may raise the competition that U.S. factories face. ''The competition from abroad, it may be hard to believe, is only starting now to intensify,'' said Richard Berner, chief economist at Mellon Bank.
Aside from manufacturing, the economy appears to be chugging along. An NAPM reading above 43.6 historically points to overall economic growth. Recent manufacturing history recalls periods during the 1980s when the factory sector fell into recession but the broader economy kept growing. In that context, the NAPM data probably will not change the Federal Reserve's policy on interest rates, though some officials at the central bank probably feel reassured about Tuesday's quarter-point rate cut, Nomura's Stone said.
The report had little effect in financial markets, where stocks fell sharply and bond prices jumped before it was released.
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