Growth slows down in US manufacturing

WASHINGTON --Manufacturing in the nation expanded at the slowest pace in more than three years last month and construction spending unexpectedly declined because of a deteriorating housing market.

The Institute for Supply Management's factory index fell to 51.2, lower than forecast, from September's 52.9. A reading higher than 50 signals expansion. A measure of prices paid for raw materials dropped to the lowest in more than four years. Outlays for construction fell 0.3 percent in September following no change in August, the Commerce Department said yesterday in Washington.

Manufacturers are providing little spark for the economy, which grew the least since 2003. Together with weaker consumer confidence reported Tuesday, the figures spurred traders to begin wagering the Federal Reserve will cut interest rates by the end of March.

"You can see the evidence of economic slowing here almost every day," said Roger Kubarych, senior economic adviser at HVB America Inc. in New York and a former Fed economist. The Fed is "going to have to come off this bias toward tightening very soon. The risks of an economic slowdown are very great."

Companies may be reluctant to spend more on equipment as the five-year economic expansion shows signs of strain.

"We are in a significant slowdown in factory activity," said Richard DeKaser, chief economist at National City Corp. in Cleveland. "The slowdown in overall economic growth is taking a toll on the factory sector and the reality of somewhat bloated inventories for certain goods is prompting a cutback in production."

Fed policy makers may take comfort in the drop in the index of prices manufacturers pay for raw materials, which suggests inflation pressures are subsiding.