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US manufacturing shrinks to 3-year low

Manufacturing in the United States is at its weakest level since July 2009, a month after the recession’s end.

Nam Y. Huh/Associated Press

Manufacturing in the United States is at its weakest level since July 2009, a month after the recession’s end.

WASHINGTON — US manufacturing shrank in November to its weakest level since July 2009, one month after the Great Recession ended. Worries about automatic tax increases in the new year cut demand for factory orders and manufacturing jobs.

The Institute for Supply Management said Monday that its index of manufacturing conditions fell to a reading of 49.5. That is down from 51.7 in October.

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Readings above 50 signal growth, while readings below indicate contraction. Manufacturing grew in October for only the second time since May. The ISM is a trade group of purchasing managers.

A gauge of new orders dropped to its lowest level since August, a sign that production could slow in the coming months. Manufacturers also sharply reduced their stockpiles, indicating companies expect weaker demand.

‘‘Today’s report suggests that the manufacturing sector is likely to remain a weak point in the recovery for a few months yet,’’ Jeremy Lawson, an economist at BNP Paribas, said in a note to clients.

Stocks declined after the survey was released, giving up early gains. The Dow Jones industrial average closed down nearly 60 points.

The weak manufacturing survey overshadowed other positives economic reports.

Greater home building boosted US construction spending in October by the most in five months.

Manufacturing activity in China grew in November for the second straight month. And US auto sales rebounded last month after Hurricane Sandy held sales back in October.

US manufacturers are concerned about the fiscal cliff, the ISM survey noted. That is the name for sharp tax increases and government spending cuts that will take effect in January if Congress and the Obama administration fail to strike a budget deal before then.

Worries about the fiscal cliff have led many companies to pull back this year on purchases of machinery and equipment, which signal investment plans. The decline could slow economic growth and hold back hiring in the October-December quarter.

A measure of hiring in the ISM survey fell to 48.4, the lowest reading since September 2009.

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