U.S. manufacturing activity saw a surprise contraction in November, the first time the sector failed to grow in 42 months, as new orders, employment and production dipped. Separately, U.S. construction spending took its biggest tumble in five years during October as the housing slump reduces home-building.

The Institute for Supply Management, a private research group, said today its index of manufacturing activity fell to 49.5 in November from 51.2 the prior month. Readings above 50 point to expansion in activity, while those below indicate contraction. The report was expected to show a modest uptick to 52.0.

The last time the manufacturing index contracted was in April 2003. The report also showed the first sub-50 readings in 42 months for new orders and production components.

New orders in November fell to 48.7 from 52.1 the prior month. The production index hit 48.5 versus 51.9 in October. The employment component fell to 49.2 from 50.8 in October.

Prices were one of the few areas to increase, with a November reading of 53.5 from 47.0 in October. However, the prices component remains lower than September’s 61.0. Inventories came in at 49.7 in November compared with October’s 49.4.

Export growth remained strong at 56.9, compared with 57.8 in October, with Norbert J. Ore, chairman of the ISM manufacturing survey, saying the “weaker dollar continues to fuel that segment.”

Meanwhile, total construction spending decreased 1.0% in October to a seasonally adjusted annual rate of US$1.178 trillion, the U.S. Commerce Department said today.

Spending fell 0.8% in September, revised from a previously reported 0.3% decline. Wall Street had been expecting a 0.3% drop in October. The 1.0% decline was the biggest since a 1.0% decrease in September 2001.

Residential construction spending fell 1.9% to US$605.23 billion. Residential spending decreased a revised 1.4% in September; originally, September residential outlays were estimated down 1.1%. Non-residential private construction spending was flat in October. Outlays for roads and schools rose, while spending for office buildings fell.

Private-sector construction spending decreased by 1.5% to US$905.28 billion in October. September declined by 1.1%, revised from a previously reported 0.7% drop.

Government construction spending increased 0.8% to US$273.09 billion. Public spending increased 0.2% in September; originally, September government outlays were estimated rising 0.9%. October federal government construction outlays climbed 11.6%, but state and local spending — much larger than federal spending in dollars — remained unchanged at US$253.58 billion.