America's manufacturing sector shrank at its fastest rate in almost 30 years, figures published today show.

The Institute for Supply Management's (ISM) factory index fell from 36.2 points by 3.8 to 32.4 points — hitting its lowest level since 1980. A score of less than 50 on the index indicates that the sector is shrinking.

The index, which accounts for about 12 per cent of the US economy, had been expected to drop only to 35.4 points, according to economists surveyed by Bloomberg.

Manufacturing has been hit in the past month by the collapse in the housing market and rocketing job losses that have killed demand for goods ranging from appliances to cars.

Meanwhile, the institute's measure of new manufacturing orders plunged to its lowest level since records began in 1948. Export demand was also the lowest since records started in 1988.

The measure of prices paid for goods fell as well, to its lowest level since 1949, reflecting the drop in commodity prices.

Nigel Gault, chief US economist at IHS Global Insight, said the figures showed that the US economy was shrinking at an "exceptionally rapid pace".

"With no evidence that the rate of contraction is moderating, we expect declines almost that large in the first quarter of 2009," he said.

Norbert Ore, chairman of the institute, said that all 18 industries tracked by the ISM contracted last month, the first time that had happened since Mr Ore took over in 1996.

"We've seen a tremendous amount of demand destruction," Mr Ore said, adding that he could not predict when the US manufacturing sector would recover.

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