Factory index plummets to record low: MAPI

WASHINGTON (Reuters) - Hard-hit manufacturers face their worst outlook in more than three decades as the credit crunch intensified and growth stalled in export markets, a manufacturing group said on Thursday.

A composite index of future business activity fell to 28 percent in December, the lowest level since March 1972, from 48 percent in September, Manufacturers Alliance/MAPI said in its quarterly outlook.

This is the second consecutive quarter the index has fallen below 50 percent, a key dividing line between growth and contraction.

"It seems as though manufacturing activity in most industries hit a wall following the credit crunch that erupted in mid-September," said Donald Norman, MAPI Economist and survey coordinator.

"A second factor, and related to the credit crisis, is the rapid slowing of economic activity in countries that are major trading partners of the United States."

The survey of 63 senior financial executives found a sharp retrenchment in backlog orders, another sign that overall manufacturing activity will fall during the next three to six months, the group said.

The index of backlog orders, which compared the fourth quarter backlog of orders with the backlog of orders one year earlier, fell to an all-time low of 21 percent from 49 percent in September survey, the group said.

The factory sector has been hard-hit by the recession that began in December 2007.

Last week a Commerce Department report showed new orders for November received by U.S. factories fell for the fourth straight month, while the Labor Department's monthly payrolls data showed the economy shed 149,000 factory jobs in December.

In the survey, those polled saw a slight improvement in inventory levels, an indication "that more manufacturers are having some success in bringing inventories into line with the marked decline in production," the group said.

The inventory index, based on a comparison of inventory levels in the fourth quarter 2008 with those of a year ago dropped to 50 percent in December from 58 percent in September.

(Reporting by Nancy Waitz; Editing by Tom Hals)