The Economy : Manufacturing Economy Expands

Indicator: The June survey by the National Assn. of Purchasing Management, which measures manufacturing activity.

What it did: Rose to 50.9% last month from 45.4% in May. A reading over 50% suggests that the manufacturing economy is expanding. One below that level suggests that it is shrinking.

What it means: The association says the figures indicate that the recession is essentially over for the manufacturing sector, and it predicted steady growth in coming months as retailers and wholesalers rebuild inventories.

Highlights: June was the fifth straight month the purchasing managers’ index has gained from the previous month, but it was the first time it rose above the key 50% mark since May, 1990, when it was 50.1%.

Construction Spending Drops in May

Indicator: Monthly construction spending report by the Commerce Department.

What it did: Dropped 0.9% in May, reversing direction after the largest increase in more than a year just a month earlier. Overall spending on residential, non-residential and government projects totaled a seasonally adjusted annual rate of $403.1 billion, down from $406.6 billion in April.

What it means: Analysts contend that the recession in the residential sector of the construction industry touched bottom last January. There was an increase in residential construction and relatively stable government spending, but there was no indication of any improvement in private, non-residential construction.

Highlights: Spending on residential buildings was up 2.3%, to $155.0 billion, in May. It was the first increase since March, 1990. Spending on single-family homes shot up 4.6%, to $88.2 billion, after a 0.5% gain in April. Multifamily spending, on the other hand, fell 2.5%, to $15.5 billion, after a 5.9% drop a month earlier.

Purchasing Manager’s Index The Purchasing Manager’s Index tracks overall business activity at 300 industrial companies. June, 1991: 50.9% June 1990: 49.9% Source: National Assn. of Purchasing Management

Construction Spending Billions of dollars, seasonally adjusted May, ‘91: 402.1 April, ‘91: 406.6 May, ‘90: 451.1 Source: Commerce Department

Construction Spending, AP / Los Angeles Times