The Associated Press

NEW YORK - U.S. manufacturing activity contracted in November for a third consecutive month, reflecting softness in new orders, a private industry group said Monday.

The Tempe, Ariz.-based Institute for Supply Management said its index of business activity was 49.2 in November, a slight improvement from the 48.5 reading in October, but still below 50. A reading above 50 signals the manufacturing sector is growing; a reading below 50 suggests the sector is contracting.

Analysts had forecast a reading of 51 for the month. The last time the index was above 50 was in August.

"I was disappointed. I really thought we'd go above the 50 mark," said Sherry Cooper, chief economist at BMO Nesbitt Burns Securities. "It's an improvement but there was a big drop in new orders, which is particularly troubling given that it's a precursor for improvement in manufacturing."

Many of the purchasing managers surveyed expressed concerns that their business was "flat" or "depressed." There was also anxiety about the dock shutdown on the West Coast earlier this fall, as well as the possibility of a war with Iraq.

Specifically, the survey showed a slight decline in new orders and a continuing contraction in employment among manufacturers. Production, however, showed more strength, particularly in the furniture, tobacco, textiles, chemicals and food industries.

"The trend is well established that the overall economy is holding up, but the manufacturing sector is feeling the brunt of the downturn," said Norbert J. Ore, who oversees the monthly survey for the group, formerly known as the National Association of Purchasing Management. "The decline in manufacturing employment is quickening. We are seeing a slowing in the rate of price increases. Overall, there is not really any sign of potential change."