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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (19754)	9/1/1998 12:16:00 PM
From: Jerry Olson	Read Replies (2) \| Respond to of 50167

IKE FWIW to all... Declining foreign orders hit August U.S. NAPM NEW YORK, Sept 1 (Reuters) - Collapsing foreign demand for U.S. products fueled a third straight month of contraction in domestic manufacturing in August, with no imminent reversal in sight, analysts said. On Tuesday morning, the National Association of Purchasing Management (NAPM) said its index of U.S. manufacturing activity rose slightly to 49.4 in August from 49.1 in July. A reading below 50 suggests contraction within the sector. However, the 49.4 reading equates to a 2.0 percent U.S. economic growth rate, NAPM said. Economists polled by Reuters had projected a modest rebound in the survey because of the resolution of the General Motors strike. They had forecast, on average, a reading of 50.3. But the global economic morass proved more powerful than the progress of one U.S. company, experts said. ''We continue to see the weakness emanating from Asia, and now spreading to other parts of the world, hitting our manufacturing sector,'' said Paul Kasriel, chief U.S. economist at Northern Trust. ''There's more than GM going on in manufacturing.'' Weakness appeared most clearly within the order-related components of the survey, Kasriel said. The new orders index fell to 50.9 in August from 53.2 in July. Kasriel said he found the direction of new orders troubling, even though order growth floated slightly above the break-even mark of 50. ''The new orders, at least theoretically, would be a leading indicator, and they're not showing much leadership,'' he said. Orders grew during August at a slower rate than in any of the past 29 months, Norbert Ore, chairman of NAPM's manufacturing survey committee, said during a teleconference. Export orders reflected greater weakness. They slipped to 44.1 from 45.0, showing specific evidence of slackening foreign demand. Weak international demand for commodities further dented the prices manufacturers paid for materials in August, Ore said. The NAPM price index edged up slightly to 38.4 from 38.0 but remained well below 50. ''Domestically it seems that demand is still fairly good ... but what I'm hearing from our members has more to do with international demand for commodities,'' Ore said. U.S. equity and fixed income markets reacted to NAPM data by moving in opposite directions. Stocks initially erased early gains but then clawed back, while Treasuries began to rebound from initial losses, only to retreat. Some economists advised against reading too much into the sectoral contraction seemingly indicated by the NAPM figures. ''You probably can't statistically distinguish between 49.4 and 50.3,'' said Peter Kretzmer, senior economist at NationsBanc Montgomery Securities LLC. He was referring to the slight difference between the NAPM print and experts' forecasts. The report granted little fresh insight into how severely the financial crises abroad will pinch U.S. growth, and it should not change investors' opinions about when the Federal Reserve might next move interest rates, Kretzmer said. ''It's a little weaker than I expected,'' the economist said of the data, adding that he doubted it would influence central bank policy. Asked about his monetary policy outlook, Kretzmer said he expected an eventual interest rate cut but no knee-jerk reaction to the recent slump in U.S. stocks. Related News Categories: currency, international, options, US Market News Help Copyright c 1998 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon See our Important Disclaimers and Legal Information. Question