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NAPM says growth up
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August 31, 1999: 3:00 p.m. ET
Manufacturing in 7th month of expansion as report comes out a day early
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NEW YORK (CNNfn) - The nation's factories marked their seventh consecutive month of growth in August and the overall economy kept on booming, according to a report released Tuesday, a day ahead of schedule.
The National Association of Purchasing Management had slated release of the report Wednesday, but an NAPM spokeswoman said the information was sent out a day earlier when an NAPM staffer sent the report to a fax service with the wrong release date. The news sent U.S. markets tumbling.
The NAPM reported its manufacturing activity index rose to 54.2 percent in August from 53.4 in July. Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the report was "trivially lower than (the) consensus" figure of 54.5 percent.
A reading of 50 is considered the dividing line between expansion and contraction in the manufacturing economy. Manufacturing makes up about 20 percent of U.S. economic output.
The index's price component, a gauge of inflationary pressures, jumped 5.1 percentage points in August to 59.8.
David Orr, chief economist at First Union Corp. (FTU), said it is well known Fed Chairman Alan Greenspan finds this survey useful in gauging what's happening on the "front lines" of manufacturing.
"This jump in the prices paid component has to raise the probability of another Fed increase on Oct. 5," Orr said, "but we would still put it below 50 percent. On the 'won't increase' side of the ledger was the supplier delivery component, which is also closely watched by Mr. Greenspan. It slipped to 51.1 from 54.2 …meaning fewer managers reported slower delivery items."
Orr said he believed the differing message from the two components would argue for the Fed to want to have at least another month's data to see which trend prevails.
"The price index was up," Shepherdson said. "This reflects the rise in oil prices and not much else, but that won't stop doom-mongers worrying about it. In short, the report shows manufacturing is still on track."
As manufacturing grew, so did the overall economy, marking its 100th straight month of expansion.
"The manufacturing sector continued to grow in August and at a faster rate than it grew in July," Norbert J. Ore, chairman of the NAPM survey committee and director of corporate purchasing at Chesapeake Corp., said in a statement. "Both production and new orders continued on a positive track in August. NAPM's price index jumped to its highest level since June 1995, indicating that manufacturers are paying higher prices for their purchases."
NAPM's production index grew in August for the eighth straight month, but at a slower rate than in July. The index stood at 56.7 percent in August, down from the July index of 58.2 percent.
Shepherdson noted employment rebounded sharply to a three-month high and export orders rose to a two-month high after slipping in recent months.
"If this is sustained we can be more hopeful the trade deficit will not rise further," Shepherdson said.
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