A separate report from the Commerce Department showed spending on building projects fell less than forecast in February. The 0.3 percent decrease followed a revised 1 percent drop in January that was smaller than previously estimated.

The Institute for Supply Management's manufacturing index increased to 48.6, shrinking for the third time in the last four months, from 48.3 in February. Fifty is the dividing line between contraction and expansion.

``It's a weak reading, but not a terrible number,'' said Robert Dye, senior economist at PNC Financial Services Group in Pittsburgh. ``The economy is entering a recession, but not falling off a cliff. Export-based manufacturing is still doing well, helped by the low value of the dollar and still-expanding economies overseas.''