what inflation?
By Bridge News New York--Apr 3--A key barometer of the health of the U.S. manufacturing economy fell in March, while prices paid by factories continued to rise, suggesting that inflation and interest rates may rise further. The National Association of Purchasing Management said its index of economic activity fell to 55.8 in March from 56.9 in February but its price index shot to 79.8 in March, its highest level since February 1995. The overall NAPM index was slightly below the 57.0 reading economists had forecast, but March marked the 14th consecutive month that the NAPM index has been above 50, the level which indicates that the nation's manufacturing economy is growing. A level below 50 suggests the factory sector is contracting. The NAPM said the manufacturing index's price component, which measures how much producers pay for raw materials, climbed to 79.8 in March, from 74.1 in February, suggesting intensifying inflationary pressures at the manufacturing level. The price index was much higher than the 75.0 reading analysts were expecting. The price index has been above 60 for the past seven months. Kevin Logan, senior market economist at Dresdner Kleinwort Benson Securities, also said inflation "is beginning to percolate a little bit." Logan added that "all the factors that were pulling down prices in early 1997-1998 are gone, so now the price indexes are going to get back to a point wh ere they are going to show a bit more inflation." The Federal Reserve has raised rates five times in the past nine months and economists say the Fed will almost certainly raise rates again in May in order to keep prices pressures to getting out of control. Analysts had expected higher oil prices in March to boost the price index. Oil prices in early March shot to above $34 a barrel, hitting their highest levels since November 1990. Oil prices have since retreated to around $26 a barrel. The Organization of Petroleum Exporting Countries (OPEC) last week decided to boost production to relieve pressure on prices. Norbert J. Ore, chairman of the NAPM's survey committee, said, however, that prices are also rising in commodity sectors that are not directly affect by crude oil prices. Items such as wood pulp, lumber and electrical goods and rising largely due to very strong demand in some sectors, he said. Among other components of the NAPM report, the new orders index--a leading indicator of broad activity -- slipped to 56.9 in March from 60.5 in February, suggesting that the manufacturing sector has reached a plateau, Ore said. The employment index declined to 51.5 from 53.2, indicating that manufacturers are still adding to payrolls, but at a slower pace than in February. In separate report, the Commerce Department said Monday that the construction industry continued to boom in February. U.S. construction spending unexpectedly rose 1.5 percent in February, the government said, led by a 4.8 percent increase in private, commercial construction. Construction spending has now increased for five consecutive months. End |
