Economy is inching forward Manufacturing up a bit

income stalls

June 02, 1993|By New York Times News Service

The moderate economic expansion, which showed signs of flagging in early spring, might be back on a slow but steady track, according to one report issued yesterday.

Manufacturing grew modestly in May, after having weakened in March and April, the closely watched survey of corporate purchasing managers showed. And the Commerce Department said yesterday that consumers returned to shopping malls and auto dealers' lots in April after staying home most of March.

But other government figures showed that construction remained in its rut in April and that personal income was flat in the month, suggesting that consumers were depleting their savings.

The reports on manufacturing and consumer spending, however, were reassuring to some who had been fretting that the economy might slip back into recession.

Robert Bretz, a purchasing executive at Pitney Bowes who directs the survey conducted by the National Association of Purchasing Management, called the improvement "encouraging, but modest."

Economy-watchers eagerly await the purchasing managers' report because it is considered the first broad gauge of economic activity in a preceding month. It is issued several days before the government's monthly employment survey.

The purchasing managers' index, a composite of the survey results, rose to 51.1 in May, from 49.7 in April, propelled by a pickup in orders, including those from overseas; a sharp increase in production, and inventory restocking. The purchasing managers' price measure edged down, hinting that prices are rising more slowly and that inflationary pressures may be easing a bit.

A reading above 44.5 indicates that the economy as a whole, which consists largely of government and the services sector, is growing; a reading above 50 suggests that manufacturing is expanding, too.

Still, the indexes for both production and new orders remain well below last winter's readings, suggesting that growth is not nearly as robust as it was several months ago.

And there was absolutely no hint that growth is buoyant enough to generate lots of new jobs.

"What we have here is a glass that's half full," said James Annable, chief economist at First National Bank of Chicago. "If you're searching for a job, it's an absolutely inadequate economic recovery. If you're holding bonds or looking at it from the perspective of Europe, which is contracting, it's a growing economy."

Consumers, meanwhile, spent so freely in April that they dipped into their savings. Spending rose 1 percent in April, after having slipped two-tenths of a percent in March. Buying of big-ticket items, like cars and appliances, shot up 3.5 percent.

Overall, personal income was flat in April, and wages and salaries grew just three-tenths of a percent, the first gain since February. The fact that spending outpaced income -- along with polls showing that consumers are turning gloomier -- suggests that the spending spree is apt to be short.

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