NAPM services index weakens
By Rachel Koning, CBS.MarketWatch.com
Last Update: 11:45 AM ET Apr 4, 2001
TEMPE, Ariz. (CBS.MW) - A key measure of the services industry showed
Wednesday weaker-than-expected conditions in March as new orders
expanded but employers scaled back their hiring expectations and
inventory reduction slowed.
The National Association of Purchasing Management said its
non-manufacturing index registered at 50.3 in March, just on the positive side
of the index's "50" threshold.
A reading below 50 indicates a retraction in business activity, while a reading
above that mark shows business expanded.
"This data confirm that service industry growth remains near zero as the
manufacturing economy contracts," said Scott Anderson, an analyst at
Economy.com.
The March index was below economists' expectations
for 52.3 and February's reading of 51.7.
For its non-factory index, the NAPM queries more
than 370 purchasing executives from over 62
industries.
Mixed signals
New orders, a sign of future business, rose to 52.2 after 51.3 in February.
But the employment measurement fell to 49.4 vs. 50.3 a month earlier. The
employment figure is at its weakest reading since the index was launched in
1997.
Legal services, insurance, retail, public administration and real estate were the
industries most likely to still grow their workforce. Firms reporting the highest
rates of job reductions were in transportation, communication, mining, finance
and banking and agriculture, the NAPM said.
Inventories, at below 50, continued to contract, which could bode well for
increased production later on. But the rate at which stockpiles were reduced
was slower in March than in February. The March reading on inventories
change was 49 versus 47 in February. Inventory sentiment rose to 69 from 65.
The report indicates "purchasing executives felt a greater degree of discomfort
with the level of inventories in March than they did in February," said Ralph
Kauffman, chair of the NAPM's non-factory survey committee.
"Overall, non-manufacturing industries continued their long-term growth trend at
a much decreased rate of growth compared to the year 2000," he said.
Kauffman believes the U.S. economy just barely grew in the first quarter, with
gross domestic product probably at 0.1 percent.
That estimate was calculated based on the NAPM's factory-sector
measurement for March released Monday. It rose to 43.1 percent from 41.9
percent in February. The index shows that the manufacturing sector was still
falling in March, but at a slower pace than in January or February. Read the
report.
The services numbers don't change the NAPM's first-quarter growth estimate,
Kauffman said.
"On balance this report will give the Fed more reason to cut interest rates
further," Anderson said. "But the pick-up in new orders may stay the Fed's
hand until the next [Federal Open Market Committee] meeting."
The Fed, which has cut interest rates by 1.5 percentage points so far this year
in order to resuscitate the domestic economy, will gather around the
conference table on May 15.
A CBS.MarketWatch.com survey of economists calls for a half-point cut to
the Fed's 5 percent target by June.
Rachel Koning is a reporter for CBS.MarketWatch.com. |
