Purchasers’ Index Up; Manufacturing Strong

The nation’s manufacturing economy grew for the third consecutive month in June, according to an influential survey of corporate purchasing executives.

“It indicates that the manufacturing sector is not so weak as to suggest that a recession is drawing near,” said John Lonski, chief economist for Moody’s Investors Service Inc.

Other economists were less optimistic, pointing out that manufacturing accounts for only about 20% of the economy.

David Hale, chief economist at Kemper Financial Services Inc. in Chicago, said the key to avoiding a recession is consumer spending, which makes up about two-thirds of the nation’s economic activity. If consumers continue to be cautious or cut their spending further, it could spell trouble, he said.

The manufacturing survey is taken monthly by the National Assn. of Purchasing Management, which includes chief purchasing executives at more than 300 industrial companies.

The group said its purchasing managers’ index rose slightly in June to 51.1% from 50.7% in May. A reading above 50 indicates the economy generally is expanding; below 50, that it generally is contracting.

June marked the third straight month that the index was above 50. During the 11 previous months the index declined.

The index, a composite of survey results on order levels, prices, inventory and other areas, averaged 49.1% for the first half of the year.

If the June index reading is repeated for the rest of the year, it would be consistent with real gross national product growth of about 1.9%, the group said from its Tempe, Ariz., headquarters.

“The manufacturing economy ended the second quarter with a moderate, but solid, increase in growth,” said Robert J. Bretz, chairman of the group’s business survey committee.

Hale said the strength in the index is less significant than it appears because much, if not all, of it stemmed from rising car production. Auto makers, which scaled back production in April, stepped up manufacturing in May and June.