The U.S. National Association of Purchasing Managers’ Index for October plunged today, convincing economists that more rate cuts are coming.

The NAPM fell below the 40 mark to 39.8, this usually signals a severe downturn. Below 50 is considered recessionary.

“U.S. manufacturing plunged deeper into recession in October as the aftershocks from the September 11 tragedy played havoc with U.S. industry,” says BMO Nesbitt Burns. “Prices paid dipped to an incredibly low 32.5 level — consistent with factory price deflation and much weaker profits.”

“Yesterday may have been Halloween, but purchasing managers spooked the market today with their news on the state of the US manufacturing sector. None of the 20 industries covered in this report reported growth in the month of October,” says CIBC World Markets.

“Prior to September, the index was slowly gaining ground, signaling that manufacturing activity may have been nearing a bottom. But now, given the setback manufacturers received after the 11th, today’s report suggests that it will take much longer for this industry to recover than previously expected.”

CIBC indicates that some of the pessimism may be overstated due to the psychological shock effect from the September attack, but the depth of the decline points to a protracted weakening at the factory level. “The details of October’s NAPM report are even scarier. The declines in production and new orders are among the largest in the history of the report. Export and import orders were both down, signaling weakness in demand both home and abroad, while the employment index dropped significantly, reflecting the numerous layoff announcements over the past month.”

TD Bank economists say that the report pretty much guarantees another aggressive 50 basis point interest rate cut from the Federal Reserve next week. “Although interest rate cuts and a healthy does of fiscal stimulus should get the economy back on the road to health early next year, the balance of this is year likely to be a hard grind and the recovery expected next year will be slow.”

BMO agrees that the report points to 50 basis points of Fed easing next Tuesday, unless a stronger-than-expected jobs report materializes tomorrow. “Odds against that remain heavy.”

CIBC says tomorrow’s payrolls report is likely to give a better indication of just how deep the decline may be for Q4 GDP. “With these bleak NAPM figures, even an on-consensus 300,000 drop in payrolls tomorrow would provide ample justification for a half-point overnight cut at the next FOMC.”