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Manufacturing Growth Subsided in December

January 3, 1995

NEW YORK (AP) _ American manufacturing grew less strongly in December than in the previous month, indicating that general economic expansion is slowing, according to a widely-followed survey of manufacturers released today.

The National Association of Purchasing Managers said its index of manufacturing growth fell to 57.8 percent in December from 61.2 percent in November. It was the lowest reading since August, when the index was 56.2 percent.

The NAPM index has indicated growth for sixteen consecutive months, but December’s reading is the first time in six months the index was lower than the previous month.

An index reading above 50 percent indicates an expansion of activity at the nation’s factories, while a reading below 50 percent indicates a decline.

``It indicates a moderate slowdown in the manufacturing economy,″ said Ralph G. Kauffman, chairman of NAPM’s business survey committee and procurement manager at Oryx Energy Co.

Most of the NAPM report’s key indexes fell in December, reflecting that manufacturers are seeing a slowdown in demand for their products, the NAPM said.

Factory production increased at its lowest rate in three months and new orders improved, but below November’s rate.

The NAPM report carried hints of inflation in its prices segment. The NAPM price index surged to 83 percent in December from 77.9 percent in the previous month, its highest level since March 1980 and the fourth time in the past five months that the price index has risen.

The number of companies reporting higher prices also grew. Seventy-one percent of NAPM’s members paid higher materials prices, compared to 68 percent in November.

Manufacturers reporting the greatest incidence of price increases included plastics and rubber companies, apparel makers and instruments and photographic equipment companies.

Higher prices suggest that inflation is on the rise.

``The prices-paid segment is the most troubling part of the report,″ said Kauffman.

Bond traders dislike news of inflation because it erodes the value of fixed-income investments like Treasury bills. The price of the Treasury’s key 30-year bond fell nearly $5 for every $1,000 in face value this morning.

The purchasing managers assocation, based in Tempe, Ariz., surveys managers at more than 300 industrial firms nationwide. The data, which represents the latest evidence on how the economy is performing, is widely followed by economists and the financial markets.

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