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Manufacturing Slows, Jobless Claims Rise : Economy: Pace of growth slackens after year-end spurt, several reports show.

April 02, 1993|From Times Wire Services

WASHINGTON — The healthy pace of manufacturing activity slowed sharply in March, a key industry group said Thursday, while new claims for unemployment benefits jumped, providing fresh evidence that the economy has slowed from its rapid year-end acceleration.

Samuel D. Kahan, an economist with Fuji Securities in Chicago, portrayed the national economic expansion as a "steak without any sizzle." But he also said there was no danger of its ending soon.

"The economy has turned the corner and has become self-feeding," Kahan said. He estimated that it will continue to grow at between a 2% and 2.5% rate until midyear and then increase to about 3%.

Economist Sung Won Sohn, of the Norwest Corp. in Minneapolis, said the slower growth in the first quarter of this year has been "a welcome phenomenon because the nation cannot afford a spending spree given the heavy debt burden on the part of consumers and businesses."

But, Sohn added, "the risk is that the slowdown could turn into a dip, which happened in 1990, 1991 and 1992. I'm sure it will be used as an argument for the President's economic stimulus program."

Although U.S. manufacturing grew for a sixth-straight month in March, the pace slackened from February as business production eased off the surging levels posted earlier in the year, according to the National Assn. of Purchasing Management.

The purchasing managers' index, a calculation based on the survey results, dipped to 53.4% in March from 55.8% in February and 58% in January. A reading above 50% generally indicates that the manufacturing sector is expanding, while one below 50% suggests a contraction.

"I think we will continue to have growth, it's just going to be much more moderate growth," said Robert Bretz, chairman of the association's business survey committee and director of corporate purchasing at Pitney Bowes Inc.

But the survey component measuring employment dropped slightly in March.

The Labor Department reported that the number of Americans filing first-time claims for jobless benefits shot up 33,000 in late March to the highest level in more than four months. New applications for unemployment insurance during the week ended March 27 totaled 380,000, the most since 382,000 claims were filed during the week ended Nov. 7.

Many analysts had expected claims to fall about 2,000. But in advance of the report, economists at Mitsubishi Bank in New York noted that storms in mid-March caused parts shortages in some areas, which in turn triggered plant closings later in the month.

The Commerce Department, meanwhile, reported that construction spending inched up just 0.1% in February after falling 0.5% a month earlier.

Outlays on residential, non-residential and government projects totaled $438.4 billion at a seasonally adjusted annual rate, compared to $437.9 billion in January. The report revised January's decline to just 0.5% from the 1.3% drop initially estimated last month.

Residential construction was off 0.2% in February after rising 1.4% in January.

Purchasing Managers' Index

The purchasing managers' index tracks overall business activity at 300 industrial companies. Feb., 1992: 53.4% March, 1993: 53.4% Source: National Assn. of Purchasing Management.

Construction Spending

Billions of dollars, seasonally adjusted Feb., '93: 438.4 Jan., '93: 437.9 Feb., '92: 411.8 Source: Commerce Department

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