U.S. Industry Is Expanding, Survey Finds : New Orders Up Sharply, Inventories Also Rise

The nation’s economy kept growing in July, although the pace slowed slightly from the previous month, according to a survey of corporate purchasing managers.

The National Assn. of Purchasing Management, which conducts a monthly survey of economic trends at more than 250 industrial companies, said its index of economic growth dipped to 59% in July from 59.3% in June. A reading above 50% indicates that the economy is expanding, while levels below that point generally indicate that the economy is contracting.

Production growth slowed in July, although new orders expanded sharply, and inventories rose quickly, the group stated.

“The vigorous increase in new orders, undoubtedly fueled by the surge in export orders, is impressive and signals continued robust economic growth for the balance of the third quarter,” said Robert J. Bretz, chairman of the group’s business survey committee.

Among the purchasing managers surveyed, 31% indicated that their new orders had expanded, compared to 34% in June, while 12% said their rate of new orders was worse, the same as in June.

Of the 70% of the group’s members that export, 39% reported higher export orders during July, up from 38% in June, while only 3% said export orders were worse, the same as in the previous month.

Production slowed for 13%, compared to 12% in June, and increased for 25%, down sharply from 35% in June.

Employment Gains Reported

Inventories grew rapidly, with 22% of the purchasing managers reporting higher inventories, compared with 18% the previous month, and 18% reporting a slowdown in inventory growth, compared to 22% in June.

The group said accounting for normal seasonal variations, the rate of inventory increase was the greatest since July, 1984.

“Some of the increase in inventory may be attributed to receiving products earlier than required from suppliers who closed their plants for vacation and maintenance and as a hedge against the significant number of price increases that went into effect July 1,” the group stated. In other areas:

- Prices rose for the 22nd consecutive month, although the number of managers reporting higher prices declined. About 63% reported higher prices, compared to 66% in June, while 2% reported lower prices in both months.

- Employment rose for the second straight month after falling for three straight months. Nineteen percent indicated that their employment rose, compared to 20% the previous month, while 12% said employment fell, compared to 16% in June.

The National Assn. of Purchasing Management is a trade organization representing 30,000 purchasing managers in 21 industries.