Nation's heartbeat seems strong

Manufacturing rises, as do income and construction spending

The economy

May 04, 1999|By BLOOMBERG NEWS

WASHINGTON -- U.S. manufacturing grew in April for the third month in a row, and personal income and spending and construction spending all rose in March, a series of economic reports showed yesterday.

"The economy looks like it still has lots of momentum," said Cynthia Latta, an economist at Standard & Poor's DRI in Lexington, Mass. "Manufacturing looks reasonably good. Consumer spending is rising. Housing is strong."

The National Association of Purchasing Management's factory index was 52.8 last month. While that's down from a March reading of 54.3, it still marked the third straight month the index was above 50, suggesting that more businesses reported improved conditions than showed declines.

Americans' personal incomes rose 0.4 percent in March after rising 0.5 percent in February, the Commerce Department said. Personal spending also rose 0.4 percent in March after increasing 0.8 percent in February.

In another report, the Commerce Department said construction spending rose 0.5 percent in March to a record $708.1 billion at a seasonally adjusted annual rate, paced by record spending on residential and road projects.

March's rise in personal spending was restrained by a drop in demand for automobiles, while consumers bought more nondurable goods such as clothing. The income gain for the month was limited by a 0.3 percent rise in wages, the smallest since September.

That was partly due to the first drop in wages for manufacturing, mining and agricultural jobs since June 1998.

The cooling of the NAPM index in April was due to small declines in the new orders and production categories.

Still, the decrease was the first this year and followed a nine-point increase in the index during the first quarter.

"The manufacturing sector is continuing to come back," said Norbert Ore, the National Association of Purchasing Management's survey chairman and an executive at Chesapeake Corp., a Richmond, Va., paper and packaging company.

Much of the strength of the expansion, now a record for U.S. peacetime, comes from growing consumer demand. With an abundance of jobs and rising incomes, consumers spent at the fastest pace in 11 years during the first quarter.

That propelled the U.S. economy to a 4.5 percent annual growth rate in the first three months of the year, after a 6 percent gain in last year's final quarter.

Last year's slump in manufacturing was caused in part by the first decline in exports in 13 years. Recessions in Japan and elsewhere curtailed international demand for American-made products.

On the inflation front, NAPM reported its index of prices paid rose to 49.9 in April from 43.2 during March, indicating more com- panies reported price increases during the month.

"There's so much competition and so little pricing power that some of the increase in oil prices will show through to consumers," Latta said. Rising oil prices make it harder for businesses "to swallow higher labor costs," she said.

Pub Date: 5/04/99

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