By Shobhana Chandra Nov. 17 (Bloomberg) -- Manufacturing in New York contracted in November at the fastest pace on record as orders and sales plunged. The Federal Reserve Bank of New York's general economic index fell to minus 25.4, the lowest since records began in 2001, from minus 24.6 percent in October, the bank said today. Readings below zero for the Empire State index signal manufacturing activity is shrinking. Factories are trimming production as banks restrict lending, worsening the economic slump that may be the longest in decades. A slide in overseas demand is also slowing American exports, which were helping manufacturers cushion the slide in U.S. sales. ``Prospects for manufacturers are getting worse,'' Ellen Zentner, a senior U.S. economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. ``Companies that were counting on export orders will not be able to do that in coming months.'' Economists forecast the Empire State index would fall to minus 26, according to the median of 46 estimates in a Bloomberg News survey. Projections ranged from minus 35 to minus 20. The gauge measuring the manufacturing outlook for six months from now dropped to 13, the second-lowest reading on record, from 24.2 the prior month. The Commerce Department reported last week that retail sales fell 2.8 percent in October, the most on record, signaling intensifying weakness that will further discourage producers. The New York Fed's measure of new orders slumped to minus 22.2 from minus 20.5 the prior month. A gauge of shipments dropped to minus 13.9 from minus 8. Less Inflation The report also showed inflation eased. The index of prices paid for raw materials decreased to 20.5 after 31.7, and the gauge of prices received fell to 6 from 20.7. A measure of employment plunged to minus 28.9, the lowest reading since December 2001, from minus 3.7. Today's report is one of the earliest regional takes on manufacturing this month. A report from the Philadelphia Fed, due Nov. 20, may show manufacturing in the region contracted in November for the 11th time in the last year, according to the Bloomberg survey median. Later today, the Fed may report that industrial production including mining and utilities rose 0.2 percent in October after a September drop of 2.8 percent that was the biggest decline since 1974, the survey median shows. The increase will probably reflect a rebound in refining and offshore drilling following the Gulf Coast hurricanes. Eastman Kodak Co., a 128-year-old photography company based in Rochester, New York, is among the businesses struggling. It predicted a third-straight annual sales decline and said it will eliminate more jobs. ``The economic environment is increasingly difficult,'' Chief Executive Officer Antonio Perez said in a statement on Oct. 30. ``We must be prudent.'' To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

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