Manufacturing shrinks as orders dwindle

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WASHINGTON — Manufacturing unexpectedly contracted in November as orders dropped to a three-month low and exports slowed.

The Institute for Supply Management’s factory index decreased to 49.5, the lowest since July 2009, from 51.7 a month earlier, the Tempe, Ariz.-based group said today.

Economists projected the index would ease to 51.4, according to the median forecast in a Bloomberg survey. A reading of 50 marks the dividing line between expansion and contraction.

Less corporate investment in equipment Congress grapples with the nation’s budget, weaker overseas orders and disturbances related to Superstorm Sandy converged to slow manufacturing.

Eleven of the 18 industries reporteded business shrank last month.

Seven of 12 Fed districts reported “either slowing or outright contraction in manufacturing,” the central bank said last week in its Beige Book business survey, which reflected information collected before Nov. 14.

Business spending on equipment and software fell 2.7 percent at an annual rate in the third quarter, the first drop since the expansion began in mid-2009. There’s also risk overseas demand for U.S-made goods will slow further. The euro-area economy hasn’t expanded for a year, and China’s economic growth has slowed for seven quarters.

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