Thursday, May 02, 2002

Slower recovery suggested

Manufacturing up; construction down

By Hope Yen
The Associated Press

        NEW YORK — Manufacturing activity grew in April for a third straight month but at a slower pace, while March construction spending fell — suggesting a more tepid economic comeback in the months ahead.

        The Institute for Supply Management said Wednesday its index of business activity fell to a lower-than-expected 53.9 in April from a revised 55.6 percent in March. An index over 50 signifies growth in manufacturing; analysts had been forecasting a reading of 55.0.

        The Commerce Department also reported Wednesday that construction activity fell 0.9 percent in March, led by a sharp drop in spending on highways, hospitals, schools and other big government projects.

        Even with the drop, the level of spending — an annual rate of $874 billion — was still considered healthy.

        “The figures suggest that the economy continues to expand, but in a real tentative way,” said Mark Zandi, chief economist at “The next six to nine months will be a period of ups and downs, with some disappointments, but growth nevertheless.”

        The ISM measure is closely tracked by economists because it offers an early reading on the health of the manufacturing sector. Its index is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 companies.

        Economists estimate growth has slowed in the current quarter to a rate of around 3 percent to 3.5 percent. First-quarter growth was given a big boost by a slowdown in inventory liquidation by businesses, something that was fleeting. Because of that, analysts said, economic growth in the second and third quarters of this year should be moderate but still solid.

        Given the budding recovery, analysts believe the Federal Reserve will leave interest rates — now at 40-year lows — unchanged at its Tuesday meeting.

        In the construction report, most of the weakness in March came from a 5.6 percent decline in spending on big government projects.

        Private builders, meanwhile, trimmed spending on commercial projects in March by 0.3 percent. Spending was lower for industrial complexes and hotels and motels, while spending on office buildings edged up slightly.


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