Economy Still Expanding but at Slower Rate

The economy grew again in March and is expected to keep expanding at least into late spring but at a more moderate pace, the National Assn. of Purchasing Management said in a monthly survey released Sunday.

Employment increased slightly last month and production rose to the highest level in nearly two years, while the speed of vendor deliveries declined noticeably and net inventories fell, the association said. The rate of new orders did slow, however.

The association represents nearly 30,000 purchasing and materials managers for industrial, commercial and utility firms, educational institutions and government agencies. Its monthly report on business, a member survey, is closely followed by the U.S. economic community.

“As we expected, the first quarter closed solidly,” said Robert J. Bretz, the association’s chairman and director of its Business Survey Committee. “The continued growth in new orders suggests a healthy economy for at least the next 30 to 60 days, but at a somewhat slower pace than the past few months.”

The purchasing managers’ composite index, a seasonally adjusted figure based on new orders, production, vendor deliveries, inventory and employment, decreased to 50.4% in March, down from 50.9% in February.

Index Still Positive

But it was the seventh straight month that the index exceeded 50%, a reading that the association said generally indicates an expanding economy. A figure below 50% generally means that the economy is in decline, it said.

Thirty-three percent of the 250 purchasing managers interviewed for the survey said the level of new orders increased in March, compared to 35% in February. Fourteen percent of those surveyed said new orders declined, compared to 12% in February.

Thirty-five percent of survey respondents reported increased production in March, the highest figure since June, 1984, when the figure also was 35%. The figure for February was 31%. Twelve percent of respondents said production worsened last month, compared to 15% in February.

Seven percent reported slower deliveries, compared to 5% the month before. Only 1% of respondents reported faster vendor deliveries in March, compared to 5% the month before. A slowdown in deliveries is a sign of increased economic activity, because orders are piling up faster than vendors can fill them. The overall rate of decline in inventories accelerated slightly in March with only 11% of survey respondents reporting higher inventories, compared to 17% in February.

Respondents reported mixed results on the prices they pay, with 17% saying prices were higher and an equal percentage saying they were down. But the survey noted that the 17% figure for higher prices was the most since September, 1984, when it stood at 19%.

The survey also noted that those reporting lower prices attributed it primarily to the declining cost of fuel oil, gasoline, petroleum products and natural gas.