Purchasers’ Index Edges Up; Manufacturing Still Weak

Weakness persisted in the manufacturing sector during December but the pace of economic decline eased, the nation’s purchasing managers reported Tuesday.

The National Assn. of Purchasing Management, which tracks economic trends by polling its members each month, said its index rose to 48% in December from 46.6% in November.

Despite the unexpectedly big improvement in the widely followed index--which raised it to the highest level since June, 1989--the reading suggested that the economy still was in a slump.

December marked the eighth-straight month in which the index has come in below the dividing line between economic growth and decline. A reading below 50 generally means that the manufacturing economy is deteriorating, and a reading above 50 indicates that it is expanding.

Financial markets keep tabs on the purchasing managers’ monthly report on business for clues about economic health. Wall Street welcomed the December report, and the Dow Jones index of 30 industrial stocks surged 56.95 to a record close of 2,810.15, surpassing its previous peak of 2,791.41, reached Oct. 9.

But the report was subject to varying interpretations.

It was regarded by some observers as additional evidence that the feeble economy needs to be livened up with a dose of lower interest rates. It tended to support the notion that the Federal Reserve Board should nudge rates lower to stimulate economic activity.

On the other hand, the report was taken as a sign that the economic downturn may have bottomed out late last year. Some stock market analysts were cheered because they thought that the purchasing managers had handed them a reason for optimism about the fortunes of industrial companies, which have been held back by the sluggish economic conditions of the past year.