Advertisement
YOU ARE HERE: LAT HomeCollections

The Economy: Report Fuels Inflation Fears

October 04, 1994

The indicators: The National Assn. of Purchasing Management said the manufacturing sector of the economy surged in September and that raw material prices climbed to their highest levels since August, 1988. Meanwhile, the Commerce Department reported a slowdown in August construction spending, the first in six months.

What they did: The purchasing managers business activity index climbed to 58.2% from 56.2% in August. It was the 13th consecutive month the survey showed an expanding manufacturing sector, with a reading well above economists' prediction of 56.8%. A reading above 50% indicates the manufacturing sector is generally expanding, while a reading below that level indicates contraction. Construction spending fell a seasonally adjusted 0.2% to an annual rate of $505 billion in August after being revised to show no change in July at a rate of $506.1 billion.

What it means: The purchasing managers index rekindled inflation fears, and some Wall Street economists expressed concern about the price increases and slower deliveries. The inflation-sensitive Treasury bond market fell in response to the report. Some analysts say the report adds to the likelihood that the Federal Reserve Board will raise interest rates for a sixth time this year to keep inflation in check. For construction spending, all of the decline in August spending came on privately financed construction projects, while government projects rose from July. Residential construction, closely watched as an indicator of consumer willingness to make large financial commitments, dropped to a rate of $237.5 billion from $239.4 billion in July.

Highlights: New orders increased at a higher rate in September than in August, the purchasing managers reported, while the employment index rose to 52.5 from 49.4 in August, showing continued strength in the jobs market. The prices component of the survey, which analysts say is a reliable indicator of future inflation at the retail level, rose to 77.1% in September from 74.5% in August as commodity prices climbed. It was the highest level since a 78.2% reading in August, 1988.

Purchasing Managers Index

The index tracks overall business activity at more than 300 industrial companies.

September 1994: 58.2%

Source: National Assn. of Purchasing Management

Advertisement
Los Angeles Times Articles
|
|
|