The Institute for Supply Management on Wednesday released a September reading of 43.5, the lowest level since October 2001. The reading dropped from 49.9 in August, the largest one-month decline since January 1984, when it fell to 60.5 from 69.9. A reading above 50 signals growth.

"The headline ISM has plunged into recession territory," said Ian Shepherdson, the chief U.S. economist at High Frequency Economics.

Wall Street economists had predicted a much stronger reading of 49.5, according to the consensus estimate of those surveyed by Thomson/IFR. The index has been hovering on what economists call "the boom-bust" line for most of the year.

The survey of purchasing man-agers found new orders fell to 38.8 in September from a reading of 48.3 in August. Employment, deliveries, inventories and manufacturers' order backlogs also fell.

Industries reporting contraction included apparel, furniture, machinery, transportation equipment and electrical appliances.

High prices for commodities, along with tight credit conditions, have begun to squeeze companies.

Pilgrim's Pride Corp., the nation's largest chicken producer, said last week it expected a "significant" fiscal fourth-quarter loss. Industrial automation and control company Rockwell Automation Inc. said Wednesday it would cut 600 sales and administrative jobs.

Tony Guzzi, the president and chief operating officer of construction company EMCOR Group Inc., said it's important to separate the slump some industries had been experiencing over the summer from the "hysteria" of the past two weeks.

When everyone realizes "this isn't the apocalypse," projects will move forward, he said.

Separately, the Commerce Department said construction activity was flat in August, better than the 0.5 percent fall economists expected. The big surprise was a 0.3 percent rise in residential activity, the first increase in the housing area since March 2007.

Originally published by Associated Press.

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