U.S. business activity contracted in March for a sixth consecutive month, reaching the lowest level in almost three decades, as companies struggle in the second year of the recession. The Institute for Supply Management-Chicago Inc. said today its business barometer decreased more than forecast to 31.4, the lowest since 1980, from 34.2 the prior month. Readings below 50 signal a contraction. The credit crisis and a global slowdown in demand are forcing U.S. manufacturers, such as automakers General Motors Corp. and Chrysler LLC, to cut workers to trim costs. The Obama administration aims to halt mounting job losses by saving or creating 3.5 million jobs. “Difficulties in the financial sector ultimately signal trouble ahead for everyone else, particularly manufacturing,” Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, said before the report. “Weakness in the Chicago number is likely to be maintained for some time, with the possibility of further declines well into 2009.” Economists projected the Chicago purchasers index would climb to 34.3, based on the median estimate of 59 economists in a Bloomberg News survey. Forecasts ranged from 28 to 40. Earlier today, the S&P/Case-Shiller index of home prices in 20 U.S. cities fell 19 percent in January from a year earlier, the fastest drop on record, as demand plummeted and foreclosures rose. Orders, Production The new orders gauge increased to 30.9 from 30.6 the previous month and the production index fell to 32.7 from 34.7. The employment index improved to 28.1 from 25.2. Weakening demand may spur more job cuts this year after the economy lost 4.4 million jobs since the downturn began in December 2007. A measure of prices paid for raw materials decreased to 34.1 from 37.8 the prior month, while a gauge of delivery times fell to 48.4 from 51. Economists watch the Chicago index for an early reading on the outlook for overall U.S. manufacturing, which makes up about 12 percent of the economy. The Institute for Supply Management’s national manufacturing index, due tomorrow, was probably little changed this month, according to the Bloomberg survey median. U.S. manufacturers are trimming payrolls as demand wanes in domestic and international markets. Lam Research Corp., a maker of chip-manufacturing equipment, said this month it plans to cut 375 jobs, or about 10 percent of the workforce, on slumping sales for semiconductors. President Barack Obama yesterday said GM and Chrysler, the No. 1 and No. 3 U.S. automakers, must survive without becoming “wards of the state.” The administration said it’s prepared to allow a structured bankruptcy if the two companies fail to remake themselves.

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