The U.S. factory sector erased the tentative gains it made in January, sliding back into contraction and adding to the uncertainty surrounding the health of the manufacturing sector.

Meanwhile, U.S. construction spending tumbled at the sharpest rate in 14 years during January, pulled down by the credit crunch and housing crisis.

The U.S. Institute for Supply Management reported Monday that its index of manufacturing activity moved to a reading of 48.3, from 50.7 in January and 48.4 in December.

The result is still slightly better than economists had expected — the median forecast had been for a reading of 48.0 in February.

In the survey, 50 is the threshold between expansion and contraction in a sector, with numbers above signaling growth.

The contractions listed in the ISM subindexes were across the board. The private research group noted that inflation pressures suffered by manufacturers rose again, with the prices index at 75.5, from 76.0 the month before. The new orders index stood at a still contractionary 49.1 from 49.5 in January, but the production index 50.7 from 55.2.

Meanwhile, the employment index came in at 46, versus the prior month’s 47.1. The February inventories index was 45.4, from 49.1 in January.

Separtately, total construction spending decreased by 1.7% at a seasonally adjusted annual rate of US$1.121 trillion, the U.S. Commerce Department said today.

It was the fourth consecutive decline. December spending fell at a seasonally adjusted annual rate of 1.3%; originally, the government said spending that month fell 1.1%.

The decrease in January outlays was much bigger than projected. Wall Street had expected construction spending for the month would decline by 0.7%. The 1.7% plunge was the sharpest since a 3.6% drop in January 1994.

Residential construction spending decreased 2.9% in January to US$462.8 billion. Year over year, residential was 19.4% lower in January.