NAPM still flashing recession
Index rises to 41.9%; could be bottom, group says
By Rex Nutting, CBS.MarketWatch.com
Last Update: 12:00 PM ET Mar 1, 2001
TEMPE, Ariz. (CBS.MW) -- The U.S. manufacturing sector is still contracting, but at a
slower pace, a private group said Thursday.
The group said the nation is in a recession for the second straight month.
The National Association of Purchasing Management said its index of business conditions
rose to 41.9 percent in February from 41.2 percent in January. Readings under 50 indicate a
contraction in the sector, while a reading under 42.7 percent shows a recession in the
economy. Read the report.
"This could be an indication that the manufacturing sector
bottomed in January," said Norbert Ore, head of the NAPM's
survey committee. But Ore cautioned that it would take more
than one month's data to confirm that hope.
"The manufacturing sector definitely lacks momentum," Ore said.
The NAPM's production index rose to 39.7 percent from 37.9 percent. The new orders index
rose to 40.8 percent from 37.8 percent and inventories rose to 45.7 percent from 42.2
percent.
The prices paid index fell to 58.1 percent from 65.7 percent, a sign that most manufacturers
are still paying higher prices
However, the employment index plunged to 37.2 percent from 43 percent, the lowest since
April 1991.
The drop in the December NAPM index to 44.3 percent was the catalyst that pushed the
Federal Reserve to slash interest rates by 50 basis points in a surprise move on Jan. 3. Some
observers on Wall Street had been forecasting a similar intermeeting move from the Fed this
week based on a weak NAPM report or further declines in consumer confidence.
But Alan Greenspan deflated those expectations in testimony Wednesday when he said
consumer confidence is still strong enough. See full story.
"The NAPM remains very low, and the risk is that slower consumer spending will soon begin
hit a broad range of industries," said Ian Shepherdson, chief U.S. economist at High
Frequency Economics.
The NAPM is a diffusion index. NAPM asks its members in companies across the nation to
assess conditions as either expanding or contracting. The index number is figured by taking
the positive responses and adding half of those saying conditions are the same.
The NAPM fell to 41.2 in January, below the 42.7 percent mark that indicates a recession in
the entire economy.
Economists were expecting the NAPM index to rise slightly to 41.6 percent in February.
Rex Nutting is Washington bureau chief of CBS.MarketWatch.com. |
