‘No Apparent Ill Effect’ From Stock Crash : Purchasers’ Index Rebounds as Orders Climb

The U.S. economy picked up speed in December as new orders and production expanded for the 12th straight month, the nation’s purchasing managers said in a report Sunday.

“The economy resumed its vigorous rate of growth in December, absorbing the recent stock market decline with no apparent ill effect,” Robert J. Bretz, chairman of the business survey committee of the National Assn. of Purchasing Management.

The association’s composite index increased to 61.6% in December from 58.9% in November. That put it just a notch below October’s 61.8%, which was the highest reading since December, 1983.

A reading above 50% generally indicates the economy is expanding, the association says.

The purchasing managers are predicting that the nation’s economy will grow about 4.1% next year, faster than in 1986, based on the average 1987 index reading of 57.6%, Bretz said.

Here are details of the report, based on a survey of purchasing managers at more than 250 industrial firms around the country:

Increases in new orders were reported by 27% of the purchasing managers and decreases by 17%. The position was the strongest for a December since 1983.

Expanded production was reported by 27% and decreased production by 9%, also marking the most positive December since 1983.

Thirty percent reported slower deliveries, against 3% who reported faster deliveries, an indication that rapid growth is leading to bottlenecks in meeting orders.

Slower deliveries and shortages in many commodities led to longer lead times for production materials. Lead times for capital expenditures were virtually unchanged.

Inventories declined for a third consecutive month, as 21% reported lower inventories against 16% who reported higher inventories. That is a positive sign because it means production is not stacking up in warehouses.

Inflation picked up, as 61% reported price increases and just 2% reported decreases. The 59-point gap was the highest since one of equal size in January, 1981.

Employment rose for a ninth consecutive month, as 16% reported more hiring and 9% reported lower employment.

Fuel oil fell in price, the first significant item to fall in price in four months. Shortages were reported in a wide range of goods, including aluminum, copper, steel and wood pulp, which is used to make paper.