Manufacturing lowest in nearly 5 years

Manufacturing declined in February to the lowest level in nearly five years.

NEW YORK (CNNMoney.com) -- A key index of manufacturing activity registered a decline in February and its weakest reading in nearly five years, according to a survey of purchasing managers in that sector released Monday.

The Institute for Supply Management's (ISM) manufacturing index fell to 48.3 from 50.7 in January. Economists were expecting a reading of 48, according to a consensus compiled by Briefing.com.

The tipping point for the index is 50, with a reading above that reflecting growth in the sector. A reading below 50 represents a decline in manufacturing.

The overall reading of the index is the weakest since April 2003, and it also marks the seventh of the past eight months that the index has registered a decline from the previous month.

"This was largely expected, but still not a good sign for the manufacturing sector," said Wachovia economist Adam York.

"It's just one more sign that there's economic weakness in the economy," added York, who believes that this report will give the Federal Reserve further incentive to cut rates at a meeting later this month.

Surveyed managers said production, new orders and inventories were relatively stable last month. The ISM index showed seasonally-adjusted production fell 4.5% in the month but is still just barely registering growth. New orders continue to decline and inventories contracted faster than the previous month, according to the index.

Though fewer managers said they expect employment to be lower in February, only 10% said they expected employment to be higher in the month.

York said the report should translate into a reading of about 2.3% growth in gross domestic product when compared to similar historical numbers.

"The report indicates that there is some overall economic growth, but it's still very slow," he noted.

Last week, the Commerce Department said its revised reading on GDP in the fourth quarter showed no change from the previously reported 0.6% annual growth rate. The nation's anemic economic expansion has economists worried that the country could easily fall into a recession.