U.S. business activity shrank in January for the fourth consecutive month, a sign the downturn in manufacturing may worsen this year. The Institute for Supply Management-Chicago said today its business barometer decreased to 33.3, lower than forecast, from 35.1 the prior month. Readings below 50 signal a contraction. Companies may keep curtailing investment and hiring as American households cut back and the global economic slump reduces exports. The Federal Reserve this week said it was ready to expand efforts to unclog lending, and President Barack Obama is pressing for a stimulus plan to pull the economy out of a recession that’s about to enter its 14th month. “U.S. business investment through 2009 will remain under pressure as consumers retrench worldwide,” Christopher Low, chief economist at FTN Financial in New York, said before the report. A government report today showed the U.S. economy shrank at the fastest pace since 1982 in the fourth quarter as consumer spending slid the most in the postwar era. Gross domestic product contracted at a 3.8 percent annual pace from October through December, the Commerce Department said today in Washington. Prices also retreated. Economists had predicted the Chicago purchasers index would drop to 34.9, based on the median estimate of 52 economists in a Bloomberg News survey. Forecasts ranged from 29.9 to 38.8. Orders, Production The new orders gauge fell to 30.7 from 31.5 the previous month and the production index declined to 29.7 from 32.4. The employment index dropped to 34.8 from 39.2, the report showed. Slumping demand may lead to more firings this year after the economy lost 2.6 million jobs in 2008, the most since 1945. A measure of prices paid for raw materials increased to 39.8 from the prior month’s 32.7 reading, while a gauge of delivery times rose to 51.9 from 50.1. The index of order backlogs increased to 26.5 from 26.3 and the inventories gauge decreased to 38 from 38.8. 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 Supply Management group’s manufacturing index, due next week, fell this month after dropping in December to the lowest level since 1980, according to the Bloomberg survey median. A government report yesterday showed orders for U.S. durable goods fell in December for a fifth consecutive month. Boeing Co. announced a plan to cut 10,000 jobs after a strike and program delays led to a fourth-quarter loss. The Chicago-based company said 2009 earnings will be lower than analysts predicted, and expects an increase in canceled or deferred orders this year. “We can and must prepare for the continued market uncertainty,” Chief Executive Officer Jim McNerney said on a conference call this week.

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