US manufacturing contracted for a second straight month in April.
The influential Institute for Supply Management's (ISM) gauge of US industry slipped to 45.4 in April from 46.2 in March.
Average forecasts had predicted a modest climb in the index to 47.2. Instead, analysts were disappointed with a fourth straight monthly decline in the ISM's measure. The gauge now stands at its lowest level since October 2001, dashing hopes for a manufacturing expansion.
"The sector continued the lacklustre performance that was evident in March, as new orders and production remained weak," the ISM report said.
Any reading below 50 indicates contraction in the manufacturing sector, which makes up roughly one-sixth of the US economy and has proved unable to exit of a two-year slump.
The findings provide fresh evidence that the end of the war in Iraq will not immediately spell an end to the economy's troubles.