Brisk Holiday Sales Signal Strong Growth

Reports of a brisk weekend of holiday sales and a new batch of economic figures pointing to stronger growth eased worries on Monday that the economy was waning.

Merchants said shoppers did plenty of buying over the Thanksgiving weekend, the official kickoff of the Christmas season. That provided evidence that consumers feel more confident about the U.S. economy and are willing to spend more this year than last.

Separately, the National Assn. of Purchasing Management said U.S. manufacturing growth accelerated in November for the sixth consecutive month, and the Commerce Department said construction spending rose 1.8% in October.

“There was a temporary slowdown in the third quarter,” said Dan Seto, an economist at Nikko Securities International Co.

“Today, we are seeing positive developments in the economy and that probably means we will likely see a rebound in growth through the start of 1997,” he said.

Wall Street, however, wasn’t upbeat on the news. Stock and bond prices were moderately lower on fears that economic strength may stir inflation and cause the Federal Reserve to raise interest rates.

The NAPM’s main index rose to 52.7 in November from 50.2 in October, well above economists’ estimates of a 50.8 reading. A reading above 50 is a sign of an expanding industrial economy.

The NAPM figures, which are widely followed on Wall Street, come as other economic reports in recent months have hinted at a slowdown. But analysts said the figures pointed toward a healthy economy that isn’t slowing too much.

“This is good news for the economy,” said Gary Thayer, a senior economist at A.G. Edwards & Sons Inc. in St. Louis. “They show that the slowdown in the economy in the second half is not snowballing into a major problem.”

And there was an indication that inflation pressures were easing, with the NAPM’s index measuring prices paid by manufacturers falling from 47.1 in October to 45.9 in November.

The NAPM figures are based on survey responses of purchasing executives at more than 300 industrial companies.

Construction spending saw its biggest gain in seven months in October, despite the second consecutive decline in spending on single-family residences. Analysts had expected spending to fall about 1% in October.

Residential, nonresidential and government outlays totaled a record $581.2 billion at a seasonally adjusted annual rate in October, the third straight increase, the Commerce Department reported.

While the gain was the steepest since a 2.3% advance in March, the report showed spending in September rose a revised 1.2%, rather than the stronger 1.9% initial estimate.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Purchasing Managers Index

The index tracks overall business activity of more than 300 industrial companies. A rating above 50% indicates an expanding industrial economy.

November 1996: 52.7%

Source: National Assn. of Purchasing Managers

Construction Spending

Seasonally adjusted, in billions of dollars:

October 1996: $581.2

Source: Commerce Department