U.S. factories saw yet another drop in activity in October, as problems in the financial sector continued to spill over into the manufacturing arena.

The Institute for Supply Management, a private research group, reported today that its index of manufacturing activity failed to grow for a third consecutive month, moving to 38.9 in October, from 43.5 in September and the 49.9 seen in August. The October reading was the lowest since September 1982, when it registered 38.8.

Readings above 50 point to expansion in activity.

Economists had expected the October index to hit 41.5.

The survey “indicates a significantly faster rate of decline in manufacturing when comparing October to September,” said Norbert Ore, who directs the ISM manufacturing survey, in a release.

“It appears that manufacturing is experiencing significant demand destruction as a result of recent events,” he added, with members indicating challenges associated with the financial crisis, interruptions from the Gulf hurricane, and the lagging impact from higher oil prices.

The October report also showed that prices rose at a much slower rate, with that index falling to the lowest level since December 2001.

In the report, the private research group said that the price index plunged to 37 in October from 53.5 in September. Export orders also contracted for the first time following 70 months of growth.

Meanwhile, the October new orders index hit 32.2, down from 38.8 in September and from 48.3 in August. The production index was at 34.1 from 40.8 in September and 52.1 in August.

Hiring fell as well, with the employment index at 34.6 in October from 41.8 in September and 49.7 in August. Inventories ticked up, with that reading at 44.3 versus September’s 43.4.

Meanwhile, U.S. construction spending fell in September, but performed better than expected.

Total spending fell 0.3%, totaling a seasonally adjusted annual rate of $1.060 trillion, the U.S. Commerce Department said today.

August spending was revised higher. It increased 0.3%; originally, the government said spending that month was flat.

The 0.3% dip in September outlays was better than projected. Wall Street had expected construction spending for the month would decline by 0.7%.