Newspaper article THE JOURNAL RECORD

Manufacturing Activity Drops to near Decade Low

Newspaper article THE JOURNAL RECORD

Manufacturing Activity Drops to near Decade Low

Article excerpt

NEW YORK (AP) -- Manufacturing activity fell to its lowest level in nearly a decade, an industry group reported Tuesday, raising further questions about the health of the U.S. economy.

Economists said the December numbers from the National Association of Purchasing Management will likely ratchet up pressure on the Federal Reserve to cut interest rates.

"I think the manufacturing sector of the economy is already in a recession and its effect has been spreading to the rest of the economy," says Sung Won Sohn, chief economist for Wells Fargo & Co.

The NAPM said its purchasing index dropped to 43.7 percent in December, down from the 47.7 it reported in November. The December reading was significantly lower than the 47.0 reading analysts had anticipated.

A purchasing managers' index above 50 signifies growth in manufacturing, while a figure below 50 means contraction.

The December figure marks the lowest level since it recorded 42.9 percent in April 1991, said Norbert J. Ore, who oversees the monthly survey.

Put another way, the December index equates to a 0.5 percent annual increase in the nation's gross domestic product. That is substantially lower than the 2.2 percent annualized growth rate experienced by the economy in the third quarter of 2000, reported by the government last month.

An index reading of 42.4 percent would be equivalent to zero growth in the overall economy.

"The manufacturing sector is definitely struggling at this point," Ore said, blaming higher interest rates and energy prices. "There are few signs of encouragement as we close out 2000."

The NAPM noted that the overall economy continued to grow in December, albeit not by much, marking the 116th consecutive month of expansion.

But there was little reason for optimism in manufacturing, with activity falling sharply in the fourth quarter of 2000, Ore said. …

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