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Manufacturing Sector's Decline Slows in March

Economy: A key index shows eighth month of contraction, but the pace moderates. Construction spending climbs again.

April 03, 2001|From Associated Press

NEW YORK — U.S. manufacturing declined in March for the eighth straight month. But the rate of decline has slowed, and the overall economy appears to be growing modestly, the National Assn. of Purchasing Management said Monday.

The association's index of business activity rose last month to 43.1 from 41.9 in February. A reading above 50 signifies growth in manufacturing, whereas a figure below 50 shows contraction.

"This index is designed to show the momentum in the economy, and the momentum is not getting worse," said Gary Thayer, chief economist at A.G. Edward & Sons. "It's still negative, but the decline has slowed down, so to speak."

The report is closely watched because it is one of the first indications of economic activity in March in the important manufacturing sector. The figures are based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 industrial companies.

The report comes against a backdrop of mixed indicators on the economy's trend.

On Thursday, the government said gross domestic product grew at an annual rate of just 1% in the October-through-December quarter, the worst showing since a 0.8% growth rate in the second quarter of 1995. But data on consumer spending have been surprisingly strong so far this year.

While manufacturing activity remained distressed, construction spending rose in February for the fourth month in a row as lower interest rates helped to keep demand stable.

The Commerce Department reported Monday that the value of construction projects nationwide climbed 0.6% to a seasonally adjusted annual rate of $834.2 billion, an all-time high.

A reading in the purchasing managers index below 42.7 generally points to a contraction in the overall economy, said Norbert J. Ore, who oversees the monthly survey. He said the average for the first three months of the year of 42.1 corresponds to a 0.2% decrease in GDP.

However, the March number alone illustrates a 0.1% pickup in the GDP, Ore said.

Ore said manufacturers remain concerned about energy costs for natural gas and electricity, particularly in the West.

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