Pace Is Slowest in 6 Months : Growth Continues, but Purchasers’ Index Dips

The U.S. economy continued to grow in September but at the slowest pace in six months, the National Assn. of Purchasing Management said Sunday.

The Purchasing Managers’ Index fell to 54.8% in September from 56.2% in August--the third consecutive monthly decline.

A reading above 50% indicates that the economy is generally expanding, while one below 50% suggests a decline.

“Virtually all indicators confirm a decided slowing in the growth of the economy,” said Robert Bretz, chairman of the NAPM’s Business Survey Committee.

Economists have been hoping to see a slowdown to cool off inflation pressures, and the Federal Reserve on Aug. 9 hiked its discount rate to 6.5% to put a lid on growth.

The Purchasing Managers’ Index is a composite index based on five seasonally adjusted indicators: new orders, production, vendor deliveries, inventories and employment with varying weightings.

Production continued to expand in September, but at a slower rate than in the prior five months. The growth rate in new orders fell for the third month running.

New export orders--a key factor in recent economic growth--expanded at a higher rate than in August but lower than the vigorous pace experienced earlier this year.

Of members who export, 27% reported higher orders, up from August’s 20%, but below the 37.8% average of the previous seven months. Six percent reported lower orders, up from 4% in August.

Vendor deliveries were slower, but the rate of slowing lessened for the third straight month. Employment increased for the fourth month in a row, but only barely.

Inventories fell for the second consecutive month, while prices were up for the 26th month running, but at the lowest rate of growth since May, 1987. For only the second time in 30 months, corrugated shipping containers were not up in price.

Although a slower economy is indicated, “the high level of new orders signals continued growth in October,” Bretz said. “Additionally, the improvement in the inflation rate suggests a healthy beginning for the fourth quarter.”

September’s index of 54.8% brings the average for the first three quarters of 1988 to 56.1%. If that average were to continue for the final quarter, it would be consistent with real gross national product of 3.7%, Bretz noted.

In short supply were aluminum, copper, nickel, stainless steel, bleached paperboard and caustic soda.