Purchasers Say U.S. Economy Is Still Growing

The economy grew for the 22nd consecutive month on the strength of new orders in May, according to a survey of corporate purchasing managers released Sunday.

The National Assn. of Purchasing Managers said its index of economic activity rose to 55.1% last month from 54.9% in April.

The index had fallen slightly the first three months of the year, indicating a slowdown in the pace of economic growth.

A reading above 50% generally indicates economic expansion, while a reading below that benchmark indicates the economy is declining, the group says.

For the first five months of this year, the index has averaged 55.1%.

“The economy continues to expand at a moderate rate,” said Robert J. Bretz, chairman of the purchasing managers’ survey committee.

“New orders fueled by robust growth in export orders, increased at a brisk pace and all but assure the first half of 1988 will end with a record of modest but healthy economic growth.”

An increase in new orders, particularly among exporters, helped boost the May index, although the growth in production slowed from the previous month, the report said.

Thirty percent of the 250 purchasing managers surveyed said their companies had more new orders, compared to 16% that reported fewer orders. Fifty-four percent said orders were running at the same rate as in April.

In April, 37% of the respondents reported more orders, compared to 14% who reported less and 49% the same.

Of those members exporting, 35% reported higher orders in May, compared to 40% in April.

The respondents in the survey also reported:

Production continued to grow, those reporting better results fell to 27% from 37% in April. Eleven percent reported a decline in production, compared to 53% the previous month.

The pace of vendor deliveries picked up slightly. Nineteen percent of the executives reported slower deliveries, down from 21% in April, while 76% reported no change in the delivery rate, up from 74% the previous month.

Inventories expanded. A quarter of managers reported rises in inventories, against 17% reporting drops. In April, 20% said inventories had risen, while 15% reported decreases.

Rising prices led declines for the 20th consecutive month. Sixty-four percent of the executives said prices were up, while 35% said they were down. In April, 70% said prices rose and 29% said they fell.

Employment fell slightly, with 14% of the managers reporting increased hiring at their companies, compared to 16% in April. Eleven percent reported a drop in jobs in both months.