The Institute for Supply Management said yesterday that its reading for the nation's manufacturers fell to 49.9 from 50 in August, matching economists' prediction.

A reading below 50 signals contraction. The index has hovered near the 50 line all year.

The group's inflation index, however, hit a six-month low. For the first time in months, many items on the list of commodity costs were coming down.

New orders, the backlog of orders, inventories and employment contracted in the sector as high gasoline prices and worries about the job market kept consumers cautious about spending.

Exports expanded, however, helping to prop up the nation's papermakers, computer producers, chemical and steel companies, among others.

Separately, the Commerce Department said construction spending declined 0.6 percent in July, double the 0.3 percent decrease analysts had been expecting.

Housing activity fell for a 16th consecutive month, declining 2.3 percent to a seasonally adjusted annual rate of $357.8 billion. That was the lowest level since March 2001, the start of the last recession.

Nonresidential activity, which had been offsetting some of the weakness in the residential sector, also fell in July, dropping 0.7 percent to an annual rate of $416.8 billion.