The U.S. economy ended the year in a steep decline, with factory orders, home sales and service industries all contracting further, reports yesterday showed.

The Institute for Supply Management’s index of non-manufacturing businesses was 40.6 for December, a higher-than-forecast reading that was still the second-worst on record. The National Association of Realtors index of pending house resales fell 4 percent in November, and the Commerce Department said orders at U.S. factories slumped for a fourth month.

Yesterday’s data, covering three separate parts of the economy, show the broad-based nature of the slump and may put pressure on Congress to quickly enact President-elect Barack Obama’s fiscal-stimulus plan. With little prospect of growth in private demand, a turnaround may hinge on the tax and spending proposals Obama is aiming at middle-class households and businesses.

“The economy fell off a cliff in the fourth quarter and is most likely still falling,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Conn. “We do expect some stabilization by midyear, partly because of Obama’s plan and partly because” of the Federal Reserve’s interest-rate cuts and emergency lending programs, he said.

The Tempe, Ariz.-based ISM’s index was projected to decline to 36.5, according to the median forecast in a Bloomberg News survey of 61 economists. The group said last week that its gauge of manufacturing fell to 32.4 in December, from 36.2 the previous month. Readings below 50 indicate a contraction.

“I don’t anticipate us seeing growth anytime soon,” Anthony Nieves, chairman of the ISM’s nonmanufacturing survey, said on a conference call. “Many companies may have been waiting until after the holiday season” before paring their work forces. “We might even see deeper job cuts as we move into the first quarter.”

The drop in pending house sales exceeded economists’ median forecast of a 1-percent fall. The report showed declines of 7.2 percent in the Northeast, 6.7 percent in the Midwest, 2.4 percent in the West and 2.2 percent in the South.

Pending resales are considered a leading indicator because they track contract signings. Closings, which typically occur a month or two later, are tallied in the Realtors’ monthly existing-house sales report. That report for December is scheduled to be released Jan. 26.

“The housing stress just doesn’t end,” said Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. in New York.

Orders to U.S. factories fell 4.6 percent in November after a revised 6-percent decrease the prior month that was larger than initially estimated, the Commerce Department said. The back-to-back decline was the biggest since records began in 1992.

The bad news probably continued last month. ISM’s manufacturing report issued last week showed that the measure of new orders reached its lowest level since record-keeping began in 1948, and prices slid the most since 1949.

The economy lost jobs in December for a 12th month as firings rippled from factories and construction companies to retailers and banks, economists project the Labor Department’s Friday employment report will show.

Merchants from Macy’s Inc. to AnnTaylor Stores Corp. were among those slashing prices by 65 percent or more to attract holiday shoppers. Sears Holdings Corp. closed underperforming stores.

“A lot of businesses have been caught flat-footed by how deep and accelerated this recession has been,” Bill Taubman, chief operating officer of shopping-mall owner Taubman Centers Inc., said in a Dec. 26 interview on Bloomberg Television.