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Manufacturing in the U.S. contracted for a third consecutive month in April, as sales slowed and investment faltered, economists said before a report today.

The Institute for Supply Management's manufacturing index probably fell to 48 from 48.6 in March, according to the median estimate of economists surveyed by Bloomberg News. A reading of 50 is the dividing line between contraction and expansion.

Manufacturers, which account for 12 percent of the economy, are cutting back as surging fuel and food costs and a loss of jobs cause consumers and businesses to retrench. Only gains in exports are preventing factories from stumbling even more as growth almost stalls.

Manufacturing “hasn't collapsed, but it certainly has weakened,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “The manufacturing number is going to be weaker rather than stronger in the next few months.''

Forecasts of the 78 economists surveyed ranged from 45.5 to 50. The Tempe, Arizona-based ISM will release the report at 10 a.m. New York time.

Other reports today are forecast to show consumer spending has slowed, firings have picked up and spending on construction projects is down.

Household spending, which accounts for more than two-thirds of the economy, probably rose 0.2 percent in March after a 0.1 percent gain a month earlier, economists project an 8:30 a.m. report from the Commerce Department will show. The two-month increase in purchases would be the smallest in more than a year.

Construction Declines

Another Commerce report at 10:00 a.m. is forecast to show that investment in building projects dropped 0.7 percent in March. While home construction has fallen for more than two years, builders have now also begun cutting back on commercial projects such as shopping malls and offices.

The number of workers filing first-time claims for jobless benefits probably rose to 365,000 last week from 342,000 a week earlier, economists estimate a Labor Department report at 8:30 a.m. will show.

The deepest housing recession in a generation is pushing the U.S. to the brink of a recession http://savingpaydayloans.com cashadvance. The economy expanded at a 0.6 percent annual pace in the first quarter, matching the prior quarter's rate, the Commerce Department reported yesterday.

The economy would have shrunk at a 0.2 percent pace if not for a gain in inventories that contributed 0.8 percent to growth.

No Collapse

So far, manufacturing has done better than in past downturns. While the ISM's factory index has been falling, it's still well above the 42.1 reading reached in February 2001, a month before the start of the 2001 recession.

Growing overseas demand is preventing manufacturing from sinking even more. The U.S. trade deficit shrank in the first quarter to the lowest level in more than five years on record exports, Commerce reported yesterday.

Government reports have shown the slowdown in manufacturing isn't deepening. Industrial output rose 0.3 percent in March following a 0.7 percent decline in February, according to Fed data. Orders for durable goods excluding transportation equipment rose more than forecast, the Commerce Department said last week.

The Federal Reserve yesterday cut its benchmark rate by a quarter point and said the housing contraction and tight credit were “likely to weigh on economic growth'' for the next few quarters. Policy makers also indicated they were ready to pause after seven rate cuts since September.

Auto Sales Down

Industry figures today are forecast to show sales of cars and light trucks fell in April at a 15 million annual pace, according to analysts and economists surveyed. Vehicles sold at an average 15.2 million annual pace in the first three months of the year, the fewest since the third quarter of 1998.

Carmakers have been at the epicenter of the slowdown in manufacturing. Detroit-based General Motors Corp., the world's largest automaker, said this week it's cutting output of large pickup trucks and sport-utility vehicles by about 10 percent this year at four plants in the U.S. and Canada because of slowing sales.

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