The nation's manufacturing activity showed signs
of hitting bottom in February although it extended its decline for
a seventh month, a key industry group said Thursday.
The widely followed report from the National Association of
Purchasing Management supported the contention Wednesday by Federal
Reserve Chairman Alan Greenspan that the downturn in the economy
appeared to be slowing in the early months of 2001.
The NAPM, an organization of corporate purchasing executives,
said its index of business activity rose to 41.9 in February from
41.2 in January.
An index above 50 signifies growth in manufacturing, while a
figure below 50 means contraction. A level below 42.7 also
generally indicates a contraction in the overall economy.
The upturn in manufacturing followed a January figure that
showed manufacturing at its lowest level since early 1991.
The NAPM said that while the February reading means the overall
economy contracted for the second consecutive month, the uptick in
the index and its components might signal that the decline has
reached its low point.
However, "we must caution that it takes more than one month's
data to make that determination," said Norbert J. Ore, who
oversees the monthly survey for the NAPM. He noted that an
important component of the index, new orders, showed a slower rate
of decline, a more positive sign for manufacturers' business.
The new figure was roughly in line with analysts' expectations
and marked the seventh straight month of contraction in the
manufacturing sector. Of the 20 industries in the manufacturing
sector, only food and tobacco reported an improvement in business
The NAPM reading was one of three reports Thursday to offer some
encouraging economic data. The Commerce Department said Americans'
incomes rose sharply in January and spending shot up even more
quickly as mild weather and deep discounts lured people into stores
and malls. In addition, spending on construction projects in
January posted the biggest increase in 10 months. With mild
weather, spending rose for new homes, office buildings and
Stocks extended their decline in early trading Thursday,
although they blipped up after the release of the NAPM report. The
Dow Jones industrial average was down 131.82 to 10,363.46, while
the Nasdaq composite index was down 45.07 at 2,106.76, a level not
seen since December 1998.
The NAPM report should not be interpreted as a sign the economy
is in recovery, but it does show business is headed in a positive
direction, said economist Sung Won Sohn of Wells Fargo & Co. in
"I would view this as a ray of hope," for manufacturing and
the overall economy, Sohn said. "We desperately need some
encouraging reports and so (the fact that) it is still hurting but
it's not hurting as much as it did, is probably positive news."
Sohn said it was particularly encouraging to see that nearly all
the components covered by the index improved in February. The
report's one negative sign was that it still shows manufacturers
are working to reduce inventories, and because of that, production
remains at a low level, he said.
"I think it will take another quarter or so for manufacturing
to eliminate unwanted inventories," Sohn said.