On top of everything else: Manufacturing sector hits a wall

WASHINGTON -- The manufacturing sector, reasonably strong until lately, is taking a severe tumble to recessionary levels as credit tightens, exports slow and domestic demand falls.

A trio of reports out Thursday pointed to gloom at U.S. factories:

•Manufacturing production fell 2.6% in September, the biggest monthly decline since May 1980, when the USA was in recession, the Federal Reserve said.

Some of the drop was attributed to production losses related to Hurricanes Ike and Gustav, and a strike by Boeing workers.

But the decline was broad-based. Factories cut production of wood products, machinery, electrical equipment, appliances and furniture. Business-equipment production fell 7% last month, suggesting companies were cutting spending even before the financial turmoil intensified in recent weeks.

•The Philadelphia Federal Reserve Bank said its index of manufacturing activity in the mid-Atlantic region plunged at the fastest pace in its 40-year history, to the lowest since October 1990, during a recession.

The regional Fed's indexes of orders, shipments and workers all dropped. Those surveyed were far more pessimistic about conditions six months out than those in a comparable survey in September. And 42% said they cut previously planned spending on new plants and equipment in light of the financial turmoil.

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•Manufacturers Alliance/MAPI, an industry trade group, said its quarterly index of manufacturing activity fell to the lowest since the end of 2001, just after the Sept. 11 terrorist attacks.

Patricia Szczuka, vice president of Computed Tool and Engineering, an Anaheim, Calif.-based company that designs and manufactures dies for a number of industries, had to lay off workers a few months ago at the firm her parents started 25 years ago.

Her order backlog has evaporated, and customers are waiting until the last possible minute to sign contracts, Szczuka says. Four years ago her automotive clients were ordering four times the number of parts they are now.