TEMPE, ARIZ. When the Institute for Supply Management's Purchasing Managers Index for August was dead even with July at 50.5, the stock market took the news badly. The Dow dove 325 points. The number represents a barely expanding industrial economy. Any number below 50 means industry is contracting.

A figure that stays the same does not indicate stagnation, however, said Norbert Ore, chairman of ISM's Manufacturing Business Survey Committee. It should not be a cause in itself of uncertainty and a further tightening of wallets, he said.

The panic over the PMI this month is irrational, Ore said. It was not the only closely watched indicator to come out that day, but the slide in stocks is not warranted by any indicators that he has seen, he added.

It seems that only a sharp rise in many indicators can assuage the fears of investors and buyers of products.

"I think it's a misunderstanding because we are on such an emotional roller coaster," Ore said.

In fact, looking back five years, there was far worse news that was overcome by a resilient economy, he said.

"In late 1997, we had the Asian financial scare and got through it. Then, a growth spurt prior to Y2K led to excessive inventories," Ore said. "Then the dot-com debacle, and we came back still. Then, we climbed out and the 2002 corporate scandals hit, and recovery once again began in June.

"How, then, can two-percent growth [in the overall economy] be a final straw, sending markets plunging?"

In July, ISM warned the manufacturing economy was growing but at a rate slower than June, and that was borne out by the identical number of 50.5 in August. And, machinery builders and other steel fabricators were particularly hurt by foreign steel tariffs imposed this year by President Bush, Ore noted.

What's in store for manufacturing? According to ISM, the manufacturing economy has been expanding for seven months but executives have concerns about growth. Many say the sector has not yet hit bottom. The consumer confidence figure was at its 2002 low in August, at 93.5.

In mid-August, a quarterly report called the Small Business Insight Survey described business owners as more wary of weak economic conditions, more concerned about the next six months and planning less business expansion. Forty-seven percent of respondents describe the economy as weak, up from 31 percent in April..