Economic activity in the U.S. manufacturing sector contracted in January, reversing an expansion in December last year, the Institute for Supply Management(ISM) reported on Thursday.

The private research group's manufacturing index registered 49.3 in January, compared with December's 51.4. A reading below 50 indicates a contraction in the sector, while a reading above 50 signals expansion.

Analysts had been expecting a reading of 51.5 for January.

The report showed that the sector's production, order backlogs and inventories all contracted in January.

Production dropped to 49.6 from 52.4 in December, while order backlogs fell to 43.5 from 45 and inventories declined to 39.9 from 48.5.

New orders registered 50.3, down from 51.9 in December. The price index, which indicates prices paid by manufacturers, increased to 53 from 47.5.

"In overall terms, manufacturing lost momentum in the second half of 2006, and is starting 2007 in a less than robust fashion," said Norbert J. Ore, chairman of the ISM's survey committee, in a statement accompanying the report.

Source: Xinhua