Manufacturing in New York contracted in February at the fastest pace on record, signaling the recession that began more than a year ago is intensifying. The Federal Reserve Bank of New York’s general economic index fell to minus 34.7, the lowest level since records began in 2001, from minus 22.2 percent in January, the bank said today. Readings below zero for the Empire State index signal manufacturing activity is shrinking. A lack of credit and sliding sales in the U.S. and abroad are prompting companies from Alcoa Inc. to Johnson Controls Inc. to trim production and slash jobs, while factories may be further hurt as businesses pare inventories to reduce costs. The slump reinforces the need for President Barack Obama’s stimulus plan to revive the economy and help households. Manufacturing “is likely to remain under severe pressure in coming quarters,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm, said in a note to clients. “With economic activity weakening sharply around the world, exports are dropping like a stone. Moreover, an increasingly constrained consumer, deepening woes for the housing sector, and a desire to pare inventories will all continue to weigh heavily on domestic demand.” Stock index futures extended declines following the report and U.S. Treasury securities held gains. Futures on the Standard & Poor’s 500 index were down 2.3 percent to 801.4 at 8:40 a.m. in New York. The yield on the benchmark 10-year note fell to 2.72 percent from 2.89 percent on Friday. Lower Than Forecast Economists forecast the Empire State index would fall to minus 23.8, according to the median of 44 estimates in a Bloomberg News survey. Projections ranged from minus 36.5 to minus 17.5. The measure of new orders decreased to minus 30.5, also the lowest on record, from minus 22.8 the prior month. A gauge of shipments improved to minus 8.1 from minus 13.1 and the index of inventories climbed to minus 8.1 from minus 19.3. The index of prices paid rose to minus 13.8 from minus 18.2, and the gauge of prices received plunged to minus 20.7 from minus 3.4, indicating profits are being squeezed even as raw-material costs drop. A measure of employment dropped to minus 39.1 from minus 26.1. Factories in the state also turned more pessimistic about the future. The gauge measuring the manufacturing outlook for six months from now dropped to minus 6.6 from minus 4. Regional Measures Today’s report is one of the earliest regional takes on manufacturing this month. The Philadelphia Fed report, due this week, may show manufacturing in the region also contracted in February, according to the Bloomberg survey median. A Fed report tomorrow is forecast to show industrial production nationwide decreased in January for the sixth time in seven months, according to the survey median. Manufacturing accounts for four-fifths of industrial production. A monthly Bloomberg News survey taken Feb. 2 to Feb. 10 showed the stimulus plan will be insufficient to avert the biggest U.S. economic decline since 1946 as consumer spending posts its longest slide on record. Johnson Controls, the world’s largest maker of automotive seats, is working to close 21 plants this year after reporting its first quarterly loss since 1992. The Milwaukee-based company last week said it is freezing wages, eliminating executive bonuses, and considering a shorter workweek. “The market here has just tanked,” Chief Financial Officer Bruce McDonald said at a conference on Feb. 11. Alcoa, the largest U.S. aluminum producer, also is cutting output, firing workers and selling units. The New York-based company, which in January reported its first quarterly net loss in six years, said it may make deeper cuts if demand keeps waning. General Motors Corp. and Chrysler LLC, already relying on government aid to survive, are due to report on their restructuring plans today. The automakers are likely to ask for additional assistance as the recession deepens.

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