Purchasers’ Index Drops to Its Lowest Level in 32 Months

The economy grew in March but at the slowest rate in nearly three years, the National Assn. of Purchasing Managers said in a report released Sunday, a sign that higher interest rates are putting the brakes on growth.

The group, which surveys members in more than 250 industrial companies, said its index declined to 50.4% from 53% in February, its lowest level in 32 months. A figure over 50% shows the economy is growing.

In March, 1988, the index stood at 54%, and last June it was 59.2%.

While most of the six categories covered in the survey showed continued growth, the rate of growth slowed and employment declined for the second consecutive month after eight months of increase.

The results of the survey, which covers 21 of the nation’s most important industries, would indicate that the Federal Reserve’s yearlong credit-tightening strategy is beginning to have an impact on the economy. The U.S. central bank has been pushing up short-term interest rates to reduce inflationary pressures.

“Despite reports to the contrary, purchasing executives continue to report a significantly slower growth in the economy,” said Robert Bretz, chairman of the purchasing manager’s business survey committee and director of materials management at Pitney Bowes.

“Virtually all indicators confirm the considerably subdued growth in the first quarter and signal even more modest growth into the second quarter,” Bretz said.

Although the index does signal a growing economy, the March figure is the lowest since July, 1986, when it stood at 48%.

The purchasing managers’ report is one of the earliest indicators of the outlook that key managers have for the economy. “We’re like a first glimpse,” Bretz said. The purchasing manager survey is modeled to reflect the gross national product, he said.

Among the six categories, the price index, at 68.3%, registered its 32nd consecutive month of rises. Except for February, it is at its lowest in 22 months.