By Timothy R. Homan Dec. 1 (Bloomberg) -- Manufacturing in the U.S. contracted in November at the fastest pace in 26 years, putting American factories at the forefront of a global industrial slump emanating from the lack of credit. The Institute for Supply Management’s factory index dropped to 36.2, the lowest level since 1982, the Tempe, Arizona-based group reported today. A reading of 50 is the dividing line between expansion and contraction. Similar measures from China, the U.K., euro area, and Russia all dropped to record lows. The financial crisis has spiraled into a global economic downturn that’s hurt sales here and abroad, forcing manufacturers to pare production. Economists increasingly are projecting that the U.S. recession will be one of the most severe in the postwar era, putting pressure on policy makers to keep lowering interest rates and boost stimulus plans. “This downturn in the global economy is probably more synchronized than we have ever seen,” said Jonathan Basile, an economist at credit Suisse Holdings in New York. Policy makers should “open the flood gates” to additional action, he said. The ISM index was projected to drop to 37, according to the median of 61 economists’ forecasts in a Bloomberg News survey. Estimates ranged from 33.5 to 40. China’s purchasing managers’ index fell to a seasonally adjusted 38.8 from 44.6 in October, the China Federation of Logistics and Purchasing reported today. An index covering the 15 nations sharing the euro dropped to 35.6, the lowest since Markit Economics began the poll in 1998. Slump Overseas VTB Bank Europe’s index covering Russia fell to 39.8, and the U.K.’s Chartered Institute of Purchasing and Supply’s factory index was at 34.4, the least since the survey began in January 1992. The U.S. ISM’s purchasing managers’ gauge of new orders for factories decreased to 27.9, lowest since 1980, from 32.2 the prior month. The production measure fell to 31.5 from 34.1. The index of prices paid dropped to 25.5, the lowest level in six decades, from 37. Energy prices have plunged from their peaks in July, when a barrel of crude oil reached $147. Last week oil dropped below $50 a barrel, the lowest price since May 2005, according to the New York Mercantile Exchange. The employment index decreased to 34.2 from 34.6 in October. The economy has lost 1.2 million jobs so far this year. Orders from overseas continue to weaken as economies abroad contract. ISM’s export gauge was unchanged at 41. Worsening Recession The U.S. economy shrank at a 0.5 percent pace in the third quarter, with business spending on equipment and software declining at a 5.7 percent rate, the biggest drop since the first quarter of 2002. Economists at Goldman Sachs and Morgan Stanley in New York are among those projecting the economy will contract at a 5 percent pace this quarter. Automakers are among the hardest hit by the slump in demand. Industry figures due tomorrow are forecast to show November auto sales dropped to a 10.5 million annualized rate, the weakest pace since April 1991, a Bloomberg survey shows. “We are all expecting the year 2009 to be a very low year in terms of demand, not only in the United States, but globally,” Carlos Ghosn, chief executive officer of Nissan Motor Co., said in a Nov. 19 interview on Bloomberg Television. “We may be facing a couple of difficult years, with very low demand.” Spending Plunge The credit crisis that intensified in mid-September has worsened the outlook. Companies are cutting payrolls and investments after consumer spending in the third quarter plunged by 3.7 percent, the most in 28 years. Fleetwood Enterprises Inc., the third-largest U.S. maker of recreational vehicles, last week said its second-quarter net loss widened as tight credit and a weak economy eroded demand for motor homes. “Consumers are hesitant to spend given current economic circumstances, and at the same time those that wish to buy are having extraordinary difficulty obtaining loans,” Fleetwood Chief Executive Officer Elden Smith said in a statement. “We do not expect market conditions to improve in the near future and we are planning accordingly.” The company said Nov. 24 it will eliminate about 760 jobs -- 13 percent of the 5,700 positions it had at the end of August. Manufacturers may have cut 80,000 jobs in November, after a loss of 90,000 the month before, according to the median forecast ahead of the Labor Department’s jobs report due Dec. 5. Companies have axed approximately 1.2 million jobs so far this year. -- With reporting by Courtney Dentch in New York. Editor: Carlos Torres To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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