U.S. Economy: Manufacturing Shrinks Further, Spending Falls (Bob Willis)

 Feb. 2 (Bloomberg) -- Manufacturing in the United States shrank again last month and consumer spending recorded an unprecedented sixth monthly decline in December, offering no sign the economy has hit bottom.

  The Institute for Supply Management’s factory index was 35.6 in January; readings less than 50 signal a contraction and the measure has been below that level since February 2008. The Commerce Department said personal spending fell 1 percent in December, and reported a third monthly drop in construction.

  Factories are likely to cut back further as the slump in household purchases leaves companies with stockpiles of unsold goods. General Motors Corp. plans to slash production at 15 plants through June in an effort to work off the surplus inventory, and Chrysler LLC, Ford Motor Co. and Toyota Motor Corp. are also cutting back.

  “The numbers are still terribly weak,” said James O’Sullivan, senior economist at UBS Securities LLC in Stamford, Connecticut. “Manufacturing is still contracting rapidly” while consumer spending is unlikely to recover “for a while,” he said.

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