Reports on growth in March, April mixed Mild cooling points to lack of inflation

Economy

May 02, 1998|By BLOOMBERG NEWS

WASHINGTON -- U.S. manufacturing cooled in April as production and orders grew at a slower rate than in the previous month and exports were a drag on growth for the fourth straight month.

The National Association of Purchasing Management's index, a closely watched gauge of factory output, fell to 52.9 in April from 54.8 in March.

"This is evidence Asia is providing a restraining influence on manufacturing," said William Sullivan, an economist at Morgan Stanley Dean Witter in New York. "Momentum in manufacturing has cooled."

In other economic reports yesterday:

The University of Michigan's final consumer sentiment index for April rose to 108.7 from 106.5 in March.

The Commerce Department reported consumer spending rose 0.5 percent in March, after increasing 0.3 percent in February.

The spending increase was driven mainly by demand for services and nondurable goods.

March incomes rose 0.3 percent, half the rate of February's increase.

"Things are about as good as they've been for the consumer in a generation," with unemployment low and incomes rising, said Cynthia Latta, an economist at Standard & Poor's DRI in Lexington, Mass.

Still, spending on new U.S. construction in March posted its first drop in five months, reflecting the colder, wetter month and weakness in public and nonresidential building.

The Commerce Department said the spending fell 0.5 percent to a $618.6 billion annual rate. That followed a 0.3 percent rise in February.

There was good news in the NAPM report's price index, considered by some an indication of the inflation rate. It fell to 41.2 in April from 44.4 during March -- the fourth straight month the index has signaled falling prices.

April's NAPM index equates to a 3.2 percent annual growth rate for the month, said Norbert Ore, chairman of NAPM's Manufacturing Business Survey Committee and director of corporate purchasing of Chesapeake Corp. That's still faster than many economists say the economy can grow without reigniting inflation.

Business executives are worried that the aftermath of the economic crisis in Asia will cut further into U.S. exports, the NAPM said. Delivery bottlenecks on Union Pacific Corp.'s rail unit, the nation's largest, also remain a concern.

The NAPM export index rose to 49.7 from 48.0. That's the fourth straight month the index has held below 50, signaling falling export orders, and the first time that's occurred since the NAPM began tracking exports in 1988.

The overall new orders index for April fell to 56.8 from 57.3, while the production index declined to 53.4 from 57.6. The inventories index fell to 46.6 from 46.8. A reading below 50 means manufacturers are liquidating inventories.

The delivery index decreased to 52.3 from 53.4. That suggests fewer bottlenecks are developing as delivery times increase.

The Commerce Department's report on the gross domestic product illustrates the pressure the crisis in the Pacific Rim has been inflicting on U.S. industry.

While the statistics showed that the economy grew at a faster-than-expected pace in the first quarter, led by increases in consumer spending and inventories, figures on international trade point to slower growth.

Pub Date: 5/02/98

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