UPDATE 1-U.S. manufacturing crashes to 26-year low in Oct

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NEW YORK, Nov 3 (Reuters) - U.S. factory activity contracted sharply in October, falling to its lowest in 26 years as the financial crisis ravaged the world’s largest economy, an industry report showed on Monday.

“Pretty grim. It means we’re in a recession, it’s as simple as that ... a pretty solid manufacturing recession,” said Robert Macintosh, chief economist at Eaton Vance Corp in Boston, adding:

“... The question is how long or deep is it going to be? Where is this group of economists that is charged with declaring a recession? Why haven’t they said anything?”

The Institute for Supply Management said its index of national factory activity fell to 38.9 in October from 43.5 in September. The level of 50 separates contraction from expansion, and a reading below 40 is exceptionally weak.

On Wall Street, stocks .DJI briefly turned lower after the weaker-than-expected data, while the dollar JPY= trimmed its gains versus the yen.

Economists had expected a reading of 41.5, according to the median of forecasts in a Reuters poll.

The report was uniformly weak, and employment in the sector was dismal. The ISM’s gauge of employment fell to its lowest since March 1991 and suffered its biggest one-month drop in 20 years.

The data foreshadowed a grim outlook, with the index of new orders hitting its lowest since 1980. (Reporting by Burton Frierson; Editing by James Dalgleish)